Modelling Lean, Agile, Resilient, and Green Supply Chain Management

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1 Modelling Lean, Agile, Resilient, and Green Supply Chain Management Izunildo Cabral 1, António Grilo 2, Rogério P. Leal 3, Virgílio C. Machado UNIDEMI, Faculdade de Ciências e Tecnologia, UNL, Caparica, Portugal (s): i.cabral@fct.unl.pt, acbg@fct.unl.pt, rpl@fct.unl.pt, vcm@fct.unl.pt Abstract. Supply Chain Management (SCM) is crucial to be present in global markets as nowadays competition is between supply chains rather than companies. Current SCM paradigms like Lean, Agile, Resilient, and Green (LARG) are usually presented as individual management philosophies. The current challenge is to make the supply chain more competitive, capable of responding to the demands of customers in a market increasingly volatile and turbulent with agility, in conjugation with environmental responsabilities, and the necessity to eliminate processes that add no value. This paper present and discusses an information model for a SCM platform to support current integrated LARG paradigms. Keywords. Lean, Agile, Resilient, Green, Supply Chain Management, Information Model. 1. Introduction The global market has imposed that competitiveness improvement requires collaborative work and partnerships across supply chains, motivating companies to make better decision to improve the Supply Chain (SC) performance. Collaboration between organizations, supported by flawless communication between their systems and applications, has been identified as key factors for enterprise sucess on a continuously changing global environment, enabling the companies to enforce their partnership and strengthen their business in the market [1]. Organizations are looking for new methods of work and business relationships, and the exchange of information and documents with partners is often incapable of being executed automatically and in digital format. Despite the existence of Supply Chain Managemet (SCM) platforms in the market, there funcitionality are very limited particularly on the context of integrating Lean, Agile, Resilient and Green (LARG) paradigms. The main objective of this paper is to present a subset of an information model for a LARG ICT platform, including Use Cases and Class Diagrams. The paper is organized as follows: firstly, it is presented a brief review about LARG SCM paradigms. In the following section is refered the entities and supply chain performance. In section 4 Use Cases are presented and a conceptual Class Diagram is proposed to support LARG SCM. Finally, some considerations are drawn on the results about the research work so far. 2. Lean, Agile, Resilient and Green SCM Paradigms: a Review A supply chain can be defined as a chain that links various agents, from the customer to the supplier, through manufacturing and services so that the flow of materials, money and information can be effectively managed to meet the business requirements [2]. Associated to an effective SCM, Information and Communication Technology (ICT) must develop new networked platforms that support managers in their decisions-making. A brief description of the main supply chain management paradigms is as follows. Lean is an approach which provides a way to do more with less (e.g., less human effort, less equipment, less time and less space), while coming closer to customer requirements [3]. The basic principles in the lean paradigm is waste elimination and cost minimization[4]. The lean paradigm is a systematic approach to identify and eliminate all non-value-added activities through continous improvement, in order to fulfill customers needs and maintaning profits [5]. 365 Proceedings of the ITI rd Int. Conf. on Information Technology Interfaces, June 27-30, 2011, Cavtat, Croatia

2 The Agile manufacturing concept focuses essentially on the ability to respond rapidly to changes in demand, both in terms of volume and variety [6]. According to [7], an agile supply chain is an integration of business partners to enable new competencies in order to respond to rapidly changing, continually fragmenting markets. For example, in an automative supply chain, where the demand of the Focal Firm can change at any moment, this paradigm is crucial since the production is continuous and just in sequence. Resilience refers to SC's ability to cope with unexpected disturbances [5]. Supply chain resilience is concerned with the system ability to return to its state or to a new more desirable state, after experiencing a disturbance, and avoiding the occurence of failures modes [8]. According to [5], in a resilient SC's system, the purpose is to react efficiently to the negative effects of disturbance, that can be more or less severe. It is important to note that resilience is not always desirable, for instance, if an organization strategy is to be lean, by reducing inventory cost, they must have a low inventory level, which makes a company less resilient. Environmentally sustainable green supply chain management has emerged as an organizational philosophy to achieve corporate profit and market share objectives by reducing environmental risks and impacts while improving ecological efficiency of these organizations and their partners [9]. According to [10], green paradigm is an integrated environmental thinking into SCM, including product design, material sourcing and selection, manufacturing processes, delivery of the final product to the customers as well as end-of-life management of the product after its useful life. Green supply chain management can reduce the ecological impact of the industrial activity without sacrificing quality, cost, reliability, performance or energy utilization efficiency; meeting environmental regulations not only to minimize ecological damage, but also leading to overall economic profit [10]. The tradeoffs between Lean, Agile, Resilient, and Green SCM paradigms must be understood to help companies and supply chains to become more efficient, streamlined, and sustainable. This imply to develop a deep understanding of the relationships (conflicts and commitments) between the lean, agile, resilient, and green paradigms, exploring and researching their contribute for the sustainable competitiveness of the overall production systems in the supply chain, measured by its Cost, Lead Time, Quality (of product) and Service Level [5]. 3. Entities and SCM performance To develop an efficient and effective supply chain, it is necessary to assess its performance. Performance measures should provide the organization an overview of how they and their supply chain are sustainable and competitive [8]. The measurement of supply chain performance is thus a crucial management process. Therefore entities must store their data and make performance data available across the SC to allow the measurement of performance. Collaboration in the SC may help to improve the entity s performance and consequently the SC s performance. According to [11], collaboration is a way by which companies in a supply chain are actively working together towards common objectives, and is characterized by sharing information, knowledge, risks and profits. In this paper, it will be considered SC s entities at just three levels: focal firm (manufacturer), raw material/components supplier (1rst tier supplier) and finished goods distributor. The network effect is not considered in order not to make the study more complex. To manage and improve the performance of this chain, it is considered a super-entity that has access of all information in the chain, which will see the supply chain as a whole. In the Fig. 1 is presented the supply chain considered. Figure 1. SC's entities of this study. In this study we consider four key SC performance indicators (KPIs): cost, service level (available in the right place at the right time), lead time, and quality (of product). Each of these KPIs has a set of metrics that can be used. For example, for cost, we have inventory cost, production cost, interoperability cost, among 366

3 others. To calculate these metrics, data must be available at the right time. According to [12], to evaluate the contribution of the paradigms practices in supply chain performance, it is necessary to establish the relationships between the supply chain characteristics changed by the paradigms (designated by management characteristics ) and their relationships with KPIs. It is considered seven management characteristics that can be altered to adjust the supply chain performance. Fig. 2 illustrates the diagram developed to capture the relationships between performance indicators and management characteristics. Figure 2. Performance indicators and management characteristics relationships [12]. The diagram depicts that, for example, if production lead time increase, lead time and cost will increase (negative effect). There are some relationships between the management characteristics; an increased integration level will reduce the inventory level. Each of these KPIs, has a set of metrics (in the context of lean, agile, resilient and green SCM) that can be used to evaluate the cost, service level, lead time and quality (of product). Performance measurement make possible interunderstanding and integrating among SC s partners while revealing the effects of strategies and potential opportunities in SC [5]. Using an ICT-based LARG platform the super entity and individual entities can measure the SC performance and understand how much the SC is LARG and the impact of the practices at the different levels. The implementation of the LARG practices will contribute to improve the KPIs, and contribute to a SC with less waste (non-value-added activities), more responsive to the customer s requirements, able to overcome disruption conditions and also to reduce environmental impacts [12]. 4. Information Model for an Integrated Lean, Agile, Resilient, and Green Platform This study includes a theoretical development to build a LARG ICT platform system. Systems requirements must be identified previously to facilitate the system development planning. To this purpose, it was used Business Process Modeling Notation (BPMN) and Unified Modeling Language (UML). It was developed a Business Process Diagram (BPD), several Use Case Diagrams, and a Class Diagram. With the BPD it is intended to provide a holistic view of the chain, processes to be improved, points where interoperability problems exist, and fundamentally data/information associated to each organization/department and process. The Use Case Diagrams were created to represent the interaction between the users and the system. The Class Diagram represents the structural component of the LARG platform, and identifies the most important classes of each paradigm (lean, agile, resilient, and green) Use Cases Diagram The platform modeling is addressed by considering the system s users (actors) which can be: i) super entity; ii) supplier; iii) focal firm; or iv) distributor. Different use cases can be created to show the interaction between the system and each specific user. For example, for measuring the overall supply chain performance, a role for the user super-entity, it is necessary data that the system can provide information for this purpose. In this case, the super entity must interact with the system the way is showed in Fig. 3. The assumption is that data will be fed into the system by the various actors (suppliers, focal firm, distributors) through web-based mechanisms. Other use cases are for example, when the focal firm is interested in consulting and comparing the supplier s inventory level to better develop their orders strategy. Fig. 4 illustrates this use case. Several use cases have be created to considering the different interactions of the actors with the system, like for 367

4 example: a) know the state of one or all orders within the SC; b) evaluate and rating suppliers; c) calculate a weight for each paradigm; d) know the state of a product, etc. important information are EOQ (Economic Order Quantity), lead time, order date, entity that makes the order, and entity that receive the order. To evaluate the agile paradigm it will be required information about the lead time, order date, date of delivery. For Green perspective on quality control, the relevant information is the number of non-conformities detected in raw materials and finished goods. For lean paradigm, some important information can be production cost, inventory cost, maintenance cost, quantity of resources, etc. Finally, for resilient paradigm, information about disturbances is necessary to assess how resilient is the entity/chain. The Class Diagram methodology was to firstly identify the Classes and their attributes and after finding the relationships between Classes. Fig. 5 shows the Class Diagram developed to LARG platform. Figure 3. Use case to evaluate SC performance. Figure 5. LARG class diagram. Figure 4. Use case diagram to check supplier's inventory level LARG Class Diagram LARG platform modeling requires information about supply chain context and each paradigm. Information about purchasing, production, quality control, distribution, inventory management, needs to be saved. For example, when an entity makes an order 4.3 Core LARG Classes and Attributes Some classes identified to support LARG information model are: entity, department, order, order state, product, entity product, product state, lot, toxic product, invoice, payment, employees, accidents, disturbances, transport vehicles, delivery, non-conformity, returns, recycled / reused, complaints, fines / penalties, environmental action, procurement, project, fairs/workshops etc. For each class we have a set of attributes that characterize the four paradigms. The class entity represents the various entities 368

5 in the chain instead of having a class for manufacturer, supplier, and distributor. Associated to this class it is created a class type the information depending on the position in the chain is inserted. The entity class attributes are: entity ID (unique entity identifier), designation (company name), capacity (installed), energy consumption and air emissions (important to assess lean and green performance), number of employees, hazardous and toxic material output (important to assess green paradigm). Other important class is disturbance. This class allows saving relevant information about the disturbance that occurs in the chain. Their attributes are disturbance ID, description, date of occurrence, duration, source, severity, duration of effect, disruption periodicity, disruption quantity loss, disruption location. Disruption periodicity is the interval between the disruptions; disruption quantity loss is the difference between what an entity normally provides and which has been providing due to disruption; disruption location refers to where in the upstream supply chain the disruption event occur (disruptions can occur at the first, second, or third tiers of the chain). This class will be related to the entity class with a relationship many to many, i.e., an entity may have zero or more disturbance, and a disturbance can affect zero or more entities. It is not required that a disturbance affect an entity, i.e., if there are a contingency plan the entity may be not affected. Figure 6 shows the core LARG class and attributes. product im market place. The class Delivery is another agile class. Resilient class is clearly Disturbance. In this class we have inportant information about resilient attributes. The class product belong to lean and resilient class. Inventory level information can give us the indication whether the entity is lean or resilient. Lean paradigm requires low inventory level and resilient requires hight inventory level. The class Fines/Penalties and Recicled/Reused are from green class, where we can store green information. 6. Conclusions The design of a LARG Supply Chain is a strategic advance towards the global market but requires the ability to make decisions, adequate to the structure of the business and its business partners. Information sharing through the use of ICT is crucial for effective supply chain management, but the simply use of ICT applications is not itself enough to realize the benefits of information sharing. This paper has presented a subset of an information model, particularly an integrated Class Diagram to support lean, agile, resilient and green paradigm SCM and some Use Cases Diagram. The paper has presented some Use Cases Diagrams and a Class Diagram. The purpose of Use Case Diagram is to identify the systems requirements, i.e., the interactions that the system will have with the actors. It considers different actors, each can be the SC entities or a superentity which will have a global perspective of the SC and that can invoke any Use Case of each entity. The Class Diagram intends to identify all relevant Classes that enable to store all relevant data/information in a LARG SCM context. The identification of the LARG classes was a difficult process since SCM is a complex network that involves many interdepent variables. 7. Acknowledgements Figure 6. Core LARG Classes and Attributes. In entity class we have lean, agile and green attributes. Energy consumption, scrap quantity represent lean and green paradigm. New product introduction is an agile attribute, that translate the agility of an entity in introducing new The authors of this paper would like to thank the Fundação para a Ciência e Tecnologia and the MIT project (MIT-Pt/EDAM- IASC/0022/2008) for funding the research work. 369

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