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As of February 1995, Digital Equipment Corporation stood as the third largest vertically integrated computer company in the world. In the early 1990 s, Digital's annual revenues exceeded ten billion dollars serving eighty-two countries including the United States. Given such a large customer base, Digital uses the Global Supply Chain Model (GSCM) to determine manufacturing and distribution strategies and also to examine supply chain alternatives. The GSCM program which has saved Digital over one hundred million dollars utilizes a mixed-integer linear methodology that integrates a global multi-product bill of materials for supply chains and a model of worldwide manufacturing and distribution decisions. Companies that face very short product life cycles and extremely fast technological advancement find GSCM ideally suited to their supply and demand decision-making tasks and also find GSCM useful in rapid deployment analysis.
Some of the key features of the program include the implementation of weighted activity time. Since Digital manufactures several products which each take different amounts of time to make and ship, the use of a simple cycle time in the objective function would lead to inaccuracies because cycle time simply represents the longest time-path in an entire manufacturing process. Weighted activity times refer to individual process times multiplied by the number of units passing through such a link in a given time. This allows for more specific problem inputs and accurate manufacturing and supply schedules.
GSCM minimizes a weighted combination of cost and activity periods. Costs included within the model include production and inventory costs, facility material handling costs, fixed overhead, taxes, and transportation costs. Due to implications of international business, the model also includes a module for duty drawback and avoidance to help model trade agreements, restrictions, and international tax considerations. GSCM directly accommodates duty considerations as part of the entire supply chain due to the large amount of money involved with high volume business across many national lines. GSCM uses the module to minimize the costs of duties and find opportunities for drawbacks. The GSCM model exhibits a special structure that allows the user to specify how much it would cost to violate a particular constraint.
Elastic penalties help the firm decide which constraints have some flexibility and which should be respected firmly. The solver temporarily ignores inconsequential constraints in order to assemble a solid solution and then readjusts it to an optimal global solution by attending to the less important details. The model employs row factorization to simplify computations of balancing inputs and outputs at each individual point in the GSCM supply chain. GSCM knows to differentiate products based on cost per unit and profit per unit when scheduling production.
The solver uses branch-and-bound enumeration which chains together costs associated with chain reaction decision outcomes. Finally, GSCM makes note of particular successes and failures allowing users to read a log and allow fine tuning of the problem parameters. The modeler will run on most computers, from PCs to mainframes. The sourcing and capacity planning group within Digital uses GSCM. The group performs data collection and analysis on the companys supply chains. Some of the typical analyses done include finding least-cost supply chains, fastest cycle times, modeling hypothetical structuring effects, source swapping, and many other cause and effect scenarios.
GSCM has allowed Digital to make the necessary changes to the companys manufacturing chain in order to remain a market contender. The depth of the model in providing a wide range of factors has provided analytical means to stabilize decision-making in the lightning fast pace of the computer equipment market. Bibliography:
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Research essay sample on Supply Chain Decision Making
