Supply chain system taxonomy: development and application
Charu Chandra, Armen Tumanyan
Department of Industrial and Manufacturing Systems Engineering
University Of Michigan – Dearborn
4901 Evergreen Road, Dearborn, MI 48128, USA
Abstract
Supply chain management deals with problems that are interrelated to each other. Their modeling and analysis
requires use of common data, which may be part of different, sometimes heterogeneous information systems.
Decision-making tools need mechanisms for accessing these data, retrieving knowledge about a particular problem,
and creating models for solving them. System taxonomy offers classification of these problems, their relationships,
and characteristics through multidisciplinary analysis of supply chain (SC) activities and attributes. It can serve as a
meta-model for problem model development. These models incorporate knowledge about different problems in
supply chain system. This paper makes the case for use of taxonomy as a technique for SC problem classification by
offering a framework and illustrating its development through systematic representations.
Keywords
Supply Chain Taxonomy, Supply Chain Classification, Supply Chain Management, Information Modeling
1. Introduction
In a rapidly changing environment, information system is the key to managing any system, especially complex
systems, such as a SC. Information organization for SC is a challenging task because of its distributed structure.
Besides, SC members are distinct organizations with their own information systems, mostly incompatible with each
other. A unified approach is required to integrate these different systems. Shared vocabulary and unified information
representation can be useful for this integration. This paper proposes a framework based on these traits for
integrating decision-making components. This will enable compatibility of different software tools and adaptability
of the entire system to the changing environment corresponding to (a) SC structure and configuration, and (b) SC
member’s information system architecture. This paper is organized as follows. First, SC system taxonomy overview
presents the overall approach of taxonomy development and its application. The next section describes how
taxonomy can be used for information structuring in various fields. A framework for taxonomy development and
application components is described. It consists of an information-modeling environment starting from highly
generalized system representation, SC domain system taxonomy development, and generic and specific problem
model taxonomy building. The last section describes a step-by-step implementation of proposed framework with
examples of the four level taxonomy development approach.
2. Supply chain system taxonomy: an overview
SC system taxonomy aims to provide a multidisciplinary representation of SC activities and characteristics. It
consists of information collection, systematic analysis, and classification of system attributes. Taxonomy is a
systematic representation of a system’s existence. Accordingly, taxonomy is built based on principles of system
theory. It is a mechanism for structuring the knowledge about a certain domain. System taxonomy is organized for
the entire system. SC is an organization, whose components are interrelated to each other. This cohesion makes the
system unmanageable, if it is considered as one unbreakable unit. System taxonomy provides mechanisms for
dividing SC system into relatively independent units, providing as minimal a coupling between units as possible.
Further, iterative decomposition can build a robust hierarchy of describing system characteristics. SC system
taxonomy is designed to represent SC characteristics in the form of meta-meta model. This is a very abstract and
problem independent representation of the system. SC system taxonomy application encompasses problem model
taxonomy development, which incorporates all characteristics with their relationships for a particular problem. The
problem model taxonomy is problem dependent and is built embedded in the structure and vocabulary of system
taxonomy. Problem solving tools need data models to operate with. Ontological commitments provide connection
with variables and contain constraints and rules applied to these variables. A discussion of ontology is out of scope
of this paper. It is, however, presented to complete the picture of information modeling environment.
Conference Proceedings, 12th Annual Industrial Engineering Research Conference (IERC 2003), Portland, Oregon, May 17 - 21, 2003.
3. Taxonomy in Sciences
Taxonomic classification systems have traditionally been designed for structuring the body of knowledge. Logically,
taxonomy is mainly motivated by two objectives [1]:
1. To introduce structure into a body of facts.
2. To build a unified and homogeneous view of the domain of interest.
Designers of taxonomic classification have followed three principles: system should be 1) organic, 2) simple to
grasp, and 3) easy to memorize. Taxonomy originally was developed as a tool for classifying biological organisms.
In biology, the assumption is that more homologies two organisms share, closer they must be in terms of
evolutionary distance [2]. Taxonomy as a tool is applied for information conceptualization, organization, and
structuring; not only in biological science, but also in Chemistry, Organizational Science, Manufacturing Systems,
and many other fields of study. One of the fundamental problems of integrating manufacturing enterprises is the lack
of theoretical basis. In other engineering disciplines there is always some basic theory to work with, in order to
provide insight and conceptual framework. For example, electrical engineers have Ohm’s law and other circuit
theorems, and mechanical engineers have Hook’s law, theories of bending, motion and so on. In manufacturing, we
have Frederic Taylor’s precepts [3]. The purpose of this paper is to provide theoretical foundation for information
organization in a SC. Taxonomy is utilized as the basis for classification and structuring of information in the SC.
Taxonomy enhances knowledge and understanding for predicting or controlling manufacturing system behavior [3].
Taxonomy deals with complexity of information by building hierarchical structure of data, wherein any
characteristic can be found, used, and updated easily.
4. The Framework
Development
In the current research methodology for information system design, domain information modeling starts directly
from problem identification and then inside the problem, taxonomies of terms and definitions are created [4], [5].
These approaches are good for stand-alone domain representations (conceptually closed systems). But systems are
usually not closed. The isolation from surrounding environment can jeopardize the correctness of information that
models are designed to represent. To bridge this deficiency, this paper proposes a novel approach for building an
additional layer in information modeling environment for SC: the system taxonomy. It considers SC as a complex
system in whole, which contains parts. SC is also a managerial system. In elaborating the framework, SC system
features are described in sufficient details. An overall framework for system taxonomy development and application
is depicted in Figure 1.
General System
Observation
General System Taxonomy
Supply Chain System
Observation
System Application Taxonomy
Specialization
ApplIcatIon
Specialization
Supply Chain
Configuration Problem
Observation
Generic Problem Taxonomy
Specialization
Supply Chain Production
Planning Problem
Observation
Problem Domain Taxonomy
Ontological commitments
Repository
Retrieving/Storing Data
Knowledge Model
Knowledge
Object model for
application
Figure 1. Supply chain system taxonomy development and application framework
The significance of system approach is that, while all possible aspects of the problem are discussed, only those
relevant to the problem are taken into account in decision-making models. General system taxonomy provides high
level clustering of characteristics, describing a system.
Conference Proceedings, 12th Annual Industrial Engineering Research Conference (IERC 2003), Portland, Oregon, May 17 - 21, 2003.
General system stands for a set of things and relationship among these things. Formally, we have S = (T, R) (1),
where S,T,R, denote a system, set of things T distinguished within domain S, and relation (or relations) R defined on
T, respectively. Thing consists of seven components: T ( I ,O, E , A, F ,M , P ) (2), which are: input, output, environment,
agent, function, mechanism, and process respectively. These components of generic system are described below in
Table 1 [6]:
Input
Output
Environment
Agent
Function
Mechanism
Process
Table 1. Seven system components
Physical item, information, or service that is necessary to start processes.
Physical item, information, or service that result from processing of input. The output is related to
the total accomplishment of the function.
Physical or sociological factors, within which system elements operate. It relates to resource
requirements, both physical and human.
Computational or human resources for carrying process.
Mission, aim, purpose, or primary concern of the system.
Physical or logical facilitators in the generation of an output.
Flows, transformations, conversions, or order of steps, which transforms an input into an output.
Application taxonomy is a specialization of generic system taxonomy as applied to a SC domain. In SC, four main
stages can be distinguished: supply, production, distribution, and consumption, as depicted in Figure 2. The
proposed framework considers these as sub-systems, with corresponding seven system components. These system
components constitute the wholeness of any system that needs to be investigated. The wholeness is important in
analysis stage, but during the design stage only a few components are incorporated into a problem representation,
that is those relevant to the problem.
Supplier 1
Retailer 1
Raw Material
vendor 1
Distribution center 1
Supplier 2
Plant 1
Vendors
Retailer 2
Distribution center 2
Supplier 3
Plant 2
Raw Material
vendor 2
Retailer 3
Distribution center 3
Supplier 4
Supply stage
Customers
Retailer 4
Production stage
Distribution stage
Consumption stage
Figure 2. Supply chain system network
The seven system components of a SC constitute the upper level of application taxonomy hierarchy and represent
the higher level of abstraction in SC information modeling. Iterative decomposition of these brings out more details
into the information capturing and representation environment. Sub-components are organized in the form of objects
and their groupings through systematic analysis of SC processes and activities. For system taxonomy design, four
corollaries are adopted from [7]. Objects or their groupings identification must meet corollary 1: standardization,
thereby providing component reusability. Objects are designed not for one particular problem, but from a system
perspective, starting from general purpose to more specific purpose, thus corresponding to corollary 2: one
component – one purpose. Object groupings are decomposed into small components (sub-groupings or objects) to
meet corollary 3: large number of small components instead of few big components. Thus, by separating the
information content, the system is made manageable, thereby, satisfying corollary 4: Uncoupled design with less
information content.
While general relations are defined for a system, conceptual relations are defined for a certain domain. Domain can
be defined as a structure (T, W) [8], where T is the set of things in a domain; W is a set of maximal states of this
Conference Proceedings, 12th Annual Industrial Engineering Research Conference (IERC 2003), Portland, Oregon, May 17 - 21, 2003.
domain (possible worlds). In other words, W is a collection of all possible instances (objects and their groupings) of
a domain. For SC, W is a set of all possible combinations of SC system things. Accordingly, SC system can be
represented as a collection of all possible states, with appropriate relationships S (T , W, R) (3).
A generic problem taxonomy is a class of problems that can occur in SC. Every problem taxonomy, either generic or
specific, must contain information about the following issues: problem description, objectives, strategies, data
model, rules pertinent to the problem, methods and approaches for dealing with the problem, and degree of
adaptability. Generic problem taxonomy can be derived from application taxonomy by specializing it to a problem,
which still can be of a general type. For each possible system instance wW , the intended structure of w according
to S is the structure: Sw (Tw , R w ) (4), where Tw is an instance of system things, Rw is the set of extensions
(relative to w) of elements of R: R Rw |wW  (5). S denotes the set of all “intended world” structures of system,
S S w|wW  (6). Sw as an instance of the system represents one SC problem and w is all possible states of this
particular subsystem. Configuration problem class is concerned with structuring and/or restructuring the network of
SC to achieve a specific goal, or a set of goals. Configuration problem adopts from SC system taxonomy the
structure and those characteristics and features, which are relevant to this particular problem Sw .
Problem domain taxonomy can be built for various issues of a generic problem. Scheduling is one such issue.
Taxonomy for this level captures from its upper level, information model general features and through domain
observation builds a specific information model that incorporates characteristics involved in solving this specific
issue. The last stage in the proposed information-modeling framework is knowledge model building. This is related
to Ontology development. Problem solving tools require models (M) to operate with. M ( Sw , I) (7). I are translators
(software programs), which connect variables V from data storage to system things T, through observation channel
Bw , and represent it in a knowledge representation format (KRF), I (V TwBw ) (8). Translators are especially
useful when system has a distributed architecture, and data are stored in heterogeneous platforms. KRF is a format
that should be understandable by all system users. Ontology can be presented as continuation of problem
representation by adding new features to it. O ( M , A) (9). Constraints are defined for decision modeling for a
problem and represented using variables identified for the purpose. A(CV BC ) (10), where A is a set of axioms
representing constraints C with variables V, through observation channel BC ,
Taxonomy development and application framework constitutes the information-modeling environment. Different
taxonomy levels represent different levels of abstraction in information representation, from where information or
knowledge can be captured and ontology built for it, thus formulating the knowledge for the desired abstraction
level.
5. System taxonomy development
5.1 Supply chain domain taxonomy
A generic taxonomy structure is applied to each stage in SC organization: supply, production, distribution, and
consumption. A common template for information structuring (taxonomy) can be applied to each of the four systems
representing these stages. This section presents taxonomy only for production system. Other system components can
be similarly represented. SC domain brings specialization to generic structure by incorporating features and issues
from SC domain. Object-oriented (O-O) modeling and unified modeling language (UML) provide tools and
methodology for deploying taxonomies. A fragment of SC domain application taxonomy in UML diagram is
depicted in Figure 3.
Application taxonomy is not specific to one SC subsystem. It is general enough to be applied to any component. The
seven components of a system are related to SC system class with composition type of relationships. Associations
relate subclasses to upper level components. Detailed elaborations of each of these components in turn reveal new
classifications described in [9]. This paper is concerned with tying SC domain system taxonomy with the problem
representation environment. In SC system taxonomy, problems are formulated mainly at strategic, tactical, and
operational levels [8]. Operational or technical system is involved with the actual task performance in an
organization such as, production and distribution of products or services. It is involved not only in technical work,
but also knowledge utilization. The second level, the tactical or organizational, coordinates and integrates the task
Conference Proceedings, 12th Annual Industrial Engineering Research Conference (IERC 2003), Portland, Oregon, May 17 - 21, 2003.
performance of the technical system. MRP and capacity planning can be considered as this class of problems. The
strategic or institutional level is involved in relating activities of the organization to its environmental system. These
are long term planning issues involving investments (fixed costs) decisions for the strategic planning horizon. The
management system spans the entire organization by directing technologies, organizing people and other resources,
and relating the organization to its environment.
Fu n c tio n s
Flo w s
Pro c e s s e s
-Product:Integer
-Information:Integer
-Material:Integer
-Order:Integer
-Financial:Integer
-Transformation:Integer
En viro n m e n t
-Means:Integer
-Goals:Integer
I n pu t
-Resources:Integer
-Information:Integer
-Materials:Integer
O u tpu t
S u pply C h ain S ys te m
-Constraints:Integer
-OrganizationalBehaviour:Integer
-Market:Integer
-Services:Integer
-Products:Integer
Me c h an is m s
Man ag e m e n t
-Strategies:Integer
-Structures:Integer
-Decisions:Integer
-Strategic:Integer
-Tactical:Integer
-Operational:Integer
Pro du c tio n U n it
-Resources:Integer
-Attributes:Integer
Ag e n ts
-Transportation:Integer
-Warehouses:Integer
Figure 3. Application taxonomy fragment
5.2 Supply chain generic and domain problem taxonomies
Splitting problem representation modeling into two parts provides the means for developing templates that can be
applied to specific situations. Templates correspond to Generic problem taxonomies. Concrete applications can use
information models provided by domain problem taxonomies. An example of configuration problem is illustrated as
a generic problem, and scheduling issue in configuration problem is taken as an example of a specific problem. SC
Configuration problem can be projected from SC domain taxonomy as a collection of four subsystems: supply,
production, distribution, and consumption. For illustrative purposes, only production system is demonstrated with
corresponding characteristics (Figure 4). Similar diagrams can be drawn for other three components of SC system.
I n pu t
O u tpu t
-Products:Integer
Fu n c tio n s
Minimize lead time
Reduce inventory
Maximize utilixation
-Resources:Integer
-Information:Integer
-Materials:Integer
En viro n me n t
Ag e n ts
Su pply Ch ain Sys te m
Me c h an is ms
Stru c tu re s
-Structures:Integer
-BOM:Integer
Flo w s
Man ag e me n t
Strate g ie s
-ResourceType:Integer
-BatchSize:Integer
-BatchType:Integer
-ManufacturingOrientation:Integer
-Operational:Integer
Pro c e s s e s
-Transformation:Integer
Pro du c tio n U n it
-Product:Integer
-Information:Integer
-Resources:Integer
-Material:Integer
-Attributes:Integer
-Order:Integer
-Financial:Integer
Sc h e du lin g
MRP
Figure 4. Configuration generic problem – Production system UML diagram
Scheduling is chosen as a specific issue for which domain problem taxonomy is demonstrated. For providing
information model for this problem, four stages of supply chain are included. However, for illustration, only the
Conference Proceedings, 12th Annual Industrial Engineering Research Conference (IERC 2003), Portland, Oregon, May 17 - 21, 2003.
production stage is depicted in Figure 5. Scheduling issue is concerned with distribution of products among
resources in a way so as to achieve maximum resource utilization, minimize lead time for production, and maximize
throughput. Figure 5 depicts characteristics involved in this problem that have to be processed by decision-making
tools.
Su pply Ch ain Produ c tion Plan n in g Proble m
Produ c tion Un it
-ID:Integer
Age n ts
Produ c t
Tran sportation
Re sou rc e
-DateOfTransportation:Integer
-DateOfDelivery:Integer
-Name:Integer
-Destination:Integer
-Shifts:Integer
-Type:Integer
-NumberOfHours:Integer
-TransportationCost:Integer -Capacity:Integer
-TransportationTime:Integer
-FixedCost:Integer
-DeliveryTime:Integer
Re sou rc e Attribu te s
Produ c tion
-ResourceName:Integer
-ProcessingCost:Integer
-Defectiveness:Integer
-SetupCost:Integer
-BreakdownFrequency:Integer
-BreakdownDuration:Integer
-SetupTime:Integer
O u tpu t
-PartStatus:Integer
-PartType:Integer
-Weight:Integer
-Size:Integer
-InventoryHoldingCost:Integer
De man d
-Data:Integer
-QuantityNet:Integer
-QuantityShipped:Integer
-PremiumTrend:Integer
-Yield:Integer
-Part:Integer
Figure 5. Information model for scheduling problem
6. Conclusion
This paper proposes a novel approach for knowledge organization for SC problem management. Using taxonomy
methodology, the article presents a framework of the supply chain system. Each layer stands at different abstract
level and serves as the template for the lower level models. The ranking of four levels is: generic system taxonomy,
application taxonomy, generic problem model taxonomy, and domain problem model taxonomy. The paper
discusses the overall approach of taxonomy development, its application and how taxonomy can be used for
information structuring in various fields and gives four taxonomy development examples to illustrate the
implementation procedure of the proposed framework.
Acknowledgement
This research is funded by grants form the University of Michigan-Dearborn under the Research Excellence and
Economic Development Fund project, and by Ford Motor Company through the University Research Program.
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Conference Proceedings, 12th Annual Industrial Engineering Research Conference (IERC 2003), Portland, Oregon, May 17 - 21, 2003.