Supply Chain a little more about this important concept

Keith Oliver from Booz Allen Hamilton first presented the supply chain concept in an interview with the Financial Times in the early 1980’s.

This supply chain concept leads companies to work with the idea that the links between different events influence the total end costs and strongly impact total profits or losses.
Dr. Chris Caplice from MIT defines supply chain simply as “two or more parties linked by a flow of resources – typically material, information, and money – that ultimately fulfill a customer request.”

A Supply Chain Operations Reference (SCOR) Model – developed by the Supply Chain Council in the 1980’s, breaks up supply chains into source, make, deliver, plan, and return functions. In turn, these result in the basic functions inside companies: procurement, inventory control, warehousing, materials handling, order processing, transportation, customer service, planning, etc.

Material handling has a very important role in the process, mainly as it deals with bulk materials, since the handling and transportation processes are an important driver for merchandise cost.

The efficiency with which materials are handled affects the entire chain as actions taken with one function impacts the other functions. The chain is only as strong as its weakest link. For bulk solid materials, pay very close attention to the handling processes: loading, transporting, and unloading play a very important role in this chain.

loading unloading

The handling and transporting processes regulate the flow of raw materials. If it takes too long to move the load, then it will negatively affect the whole chain, increase the need for inventory, and impact the service quality between the two supply chain links (i.e.: the raw material producer and user/client).

A bad decision at this stage would disrupt the supply chain. Hence, good management of this portion is essential for good results. This strongly depends on quality planning, forecasting, data acquisition and use.

Simple Process – Bulk Solids Supply Chain

In supply chain management, there are two basic concepts that define the way the players react to the rest of the chain’s movements: the push and the pull systems. Most supply chains are virtually a combination of both systems.

Push SystemPull System
execution is performed ahead of an actual orderexecution is done as a response to a defined order
based on the forecasted demand, rather than actual demand (forecasts are always wrong)the actual demand must be well known
respond quickerwill always have longer response times
can result in having excess or shortage of materialsgenerally, do not result in excess or shortages

Even though the push systems are a lot more common in practice than pull systems (most supply chains accept the cost of shortage or excess better than the lack of agility), most supply chains are still a mix of both systems.

There is a crossroad between both systems where a supply chain shifts from push to pull.

One of the strategies that combine the benefits of push and pull systems is to postpone orders. The most common way to do it is to push the raw materials, the simpler “building blocks” or components, through a forecast to avoid a shortage in the production process. Meanwhile, the final goods, the finished or customized products, are pulled.

Forecasts are important in the whole supply chain process for bulk solids because it always includes a push system. Regardless of the type of system / process, the supply chain uses containers to transport dry bulk solids as the most efficient method to move them unless there’s an enormous amount of material to transport or the origin/destination points are too close to each other.

Where to begin?

Start by establishing the scope of work and include a timeline. The more accurate it is, the results will be more reliable and efficient.

Although it is called a timeline, it doesn’t have a deadline defined for each action – it’s just a succession of events that need to happen in a certain order.

Define the product, demand, storage, path to be covered from the source to end-user, possible transportation means, and packaging. Form an information/forecasting loop or cycle with the factors described since they are almost always interrelated.

Below is the sequence of events for the timeline:

  1. Collect data about the bulk solid material to be moved:
    1. Define the type of material, density, bulk density, flow ability, humidity, angle of repose, dust formation, and contamination probability (product to container or vice-versa)
  2. Define demand (forecasted):
    1. Forecast (allow a margin of error):
      1. When dealing with a push SC system, forecasting is the most important part of the demand planning and management process.
        For a good forecast, the planner must consider all the factors mentioned above that will change from travel time to storage volumes and, even though there are subjective and objective forecasting methods for their own purpose, range forecasts tend to be more efficient than point forecasts, aggregated forecasts tend to lead to lower risks than disaggregated ones, and shorter time horizons are always more accurate than longer horizon forecasts.
      2. Good forecasting allows for better shipment planning and operation.
      3. A good forecast tends to lead to good planning.
      4. Good planning leads to more profitable supply chains.
  3. Define the path that the product will travel – from the production source to the end-use destination or intermediary industrialization point.
  4. Define conveyor and transportation mode for each portion of the process.
    1. Options to move the bulk solids: special cargo transport (tank trucks or tank rail cars, bulk cargo ships, etc.), containers, and more.
      This presents an efficiency question – What is the most efficient way of moving that specific type of product on each portion of the process?

      1. Define transport modes (truck, train, and/or ship):
        1. If the supplier and the end-user are not too far away from each other, then the transport will probably just be a truck.
        2. Possible load and unload methods will affect the choice, too.
        3. Distant suppliers and end-users may need 2 or 3 transportation modes in any possible combination.
    2. For a container, define the packaging type to comply with the product data requirements indicated in the first bullet point.
    3. Then define the type of bulk liner to be used.
    4. Select the load – unload methods for the chosen transportation modes.
  5. Define the economic order quantity (EOQ).
  6. Calculate the storage size and type (from demand forecast and the other factors) to hold material inventory and avoiding shortages until it is used.

timeline and scope

Posted by Team Bulk-Flow

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