Logistics Chain Re-Engineering of a PSU Company Using Dynamic Modeling : A Case Study

Logistics activities are being looked upon as a promising area for change because of the major potential available in improving the customer satisfaction and simultaneously reducing the logistics related costs. The analysis of dynamic behavior of complex logistics chains resulting from a re-engineering effort is a difficult task because of the interaction among various components of the system, many of which are non-linear and time-delayed. Dynamic modeling is a technique to understand the dynamic behavior of such complex systems. This paper presents the re-engineering effort on the outbound logistics chain of a Public Sector Undertaking (PSU) in India using dynamic modeling. A valid dynamic model of the outbound logistics chain was developed and analyzed to identify the possible areas of improvement. Alternative configurations taking advantage of these opportunities were developed. The performance of the present and alternative configurations was computed using a Performance Indicator (PI) incorporating cost and service level. Further, the impact of unexpected step and impulse rise in demand on the performance of the alternative configurations were evaluated. The alternative configurations resulted in significantly better performance compared to the present configuration, resulting in reduced inventory and cost. They also performed satisfactorily during the unexpected demand conditions