Supply Chain Management and
Regional Strategic Transportation Planning
Integration
A case for sustainability
Sgouris Sgouridis
Malaysia Project
Research Supervisor / Principal Investigator:
Joseph Sussman
22 October 2004
© 2004 Sgouris Sgouridis, Engineering Systems Division, Massachusetts Institute of Technology
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Agenda
•
•
•
•
Supply Chains Overview
RSTP Overview
SCM / RSTP Interfaces
Use of CLIOS as framework to study
SCM/RSTP
Engineering Systems
• Further Research
RSTP
Public Sector
Overlap:
Systems Engineering
Sustainable Development
Infrastructure expansion
Demand management, pricing
SCM
Strategic Decisions:
Competitive advantage
Market expansion
Private Sector
Logistics Decisions:
Routes
Inventories
Fleet Management
Procurement
Product development
Mergers
© 2004 Sgouris Sgouridis, Engineering Systems Division, Massachusetts Institute of Technology
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Supply Chain Management
© 2004 Sgouris Sgouridis, Engineering Systems Division, Massachusetts Institute of Technology
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What are supply chains?
A Supply Chain View
[Source of Graphic: SAP AG]
REVERSE LOGISTICS FLOW
Source: Sgouridis (2004)
MATERIAL FLOW
Inventory
Management
Imports /
Exports
Manufacturing
Suppliers
Product
Design for
SCM
Linehaul
(Road, Rail,
Sea, Air)
Warehousing
Postponed
Processing
(labeling,
kitting)
Regional
Consolidation
/ Distribution
Centers
Customer
Service
Another Supply Chain View
© 2004 Sgouris Sgouridis, Engineering Systems Division, Massachusetts Institute of Technology
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MARKET
INFORMATION FLOW
CUSTOMER
PRODUCT
FINANCIAL FLOW
Generic Supply Chains
Characteristics
• Geographically dispersed
• Multi-tiered.
• Knowledge may or may not
reside within the integrator.
Suppliers of Infrastructure
OEM Integrator
Module / Sub-system assembler
Differentiated commodities
Commodities: Parts
and Raw Materials
© 2004 Sgouris Sgouridis, Engineering Systems Division, Massachusetts Institute of Technology
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How are Supply Chains Managed?
A Snapshot of Current Trends
Outside factors
Reverse Logistics
Specialized
Consumer
Demand
Increased Firm
Competition
ICT Advances
SCM Internal Responses
Firm
Manufacturing to
Demand
Increased
customer
satisfaction
Postponed
manufacturing
Mass Customization
Inventory
Reduction
Total Cost
Reduction
In-transit
Inventory
Risk-pooling
JIT Delivery
Cross-docking
Total Quality
Management
Transportation
Technology Advances
EDI
Vendor Managed
Inventory
e-Commerce
Globalization
Outsourcing
Vertical SCM
Integration
3PL
© 2004 Sgouris Sgouridis, Engineering Systems Division, Massachusetts Institute of Technology
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How are Supply Chains Managed? II
A Snapshot of Current Trends
SCM Layer
Influenced Factors
Planning
horizon
Return
on
Investm
ent
Regional differences, supplier input,
compartmentalization, design for
assembly, product demand data
Several years
(Based on
product lifecycle)
High.
Strategic
Network
Design and
Optimization
Number, capacity and location of
production plans, suppliers,
warehouses, retailers. Decision on
transport resources.
Few months to
few years.
High.
Supply Chain
Master
Planning
Production, distribution, and
transportation strategies
Weekly to
monthly
Medium
Inventory levels, transport, production
Hourly to daily
Low.
SC-informed
Product Design
Operational
Planning
© 2004 Sgouris Sgouridis, Engineering Systems Division, Massachusetts Institute of Technology
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So why should we care about Supply
Chains?
• Importance:
– Economic Impact – capital mobility.
– Sustainability Impact – Efficiencies gained
and resource conservation.
– Global nature.
– Competitive Advantage for firms and
regions.
• Engineering Systems:
– Complexity, process optimization.
– Organizational Restructuring / Learning.
– Critical decisions for enterprise viability.
© 2004 Sgouris Sgouridis, Engineering Systems Division, Massachusetts Institute of Technology
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Regional Strategic
Transportation Planning
© 2004 Sgouris Sgouridis, Engineering Systems Division, Massachusetts Institute of Technology
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What is RSTP?
• Traditional Perspective of RSTP
– The creation of a framework based on
existing legislation to support and promote
mobility of passenger and freight in a
region.
© 2004 Sgouris Sgouridis, Engineering Systems Division, Massachusetts Institute of Technology
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Shortcomings of Traditional RSTP
[From Conclin and Sussman (2000)]
•
•
•
•
•
•
•
•
Intermodalism.
Economic integration.
Freight.
Private sector involvement.
Operations.
Technology scanning.
Transport and telecommunications.
Human resources.
[Added by Sussman, Sgouridis and Ward (2004)]
• Sustainability.
• Institutional change.
• Uncertainty management.
© 2004 Sgouris Sgouridis, Engineering Systems Division, Massachusetts Institute of Technology
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Freight Specific Expanded RSTP Goals
From:
“[The goal of freight transportation policy planning is] the
discovery and effective implementation of measures
which will reduce the total social cost of goods
movement to the lowest possible level commensurate
with the freight requirements and objectives of society.”
[Ogden (1994)]
To:
“The freight aspect of a regional strategic transportation
plan should ensure (i) an adequate, efficiently operated,
robust, and secure transportation network based on (ii) a
commensurate regulatory framework that in coordination
aim to maximize total societal benefits within a
sustainable framework.”
[Sgouridis (2004) based on Hall and Sussman (2004)]
© 2004 Sgouris Sgouridis, Engineering Systems Division, Massachusetts Institute of Technology
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Freight Specific Expanded RSTP Goals II
• Freight mobility based on
• Sustainability
– Economic growth (possible decoupling)
– Economic development / regional competitive
advantage
– Environmental stewardship
– Social impact awareness
• Safety
• Security / Robustness
© 2004 Sgouris Sgouridis, Engineering Systems Division, Massachusetts Institute of Technology
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A Framework for RSTP
Source: Sgouridis (2004), based on Dodder, Sussman and McConnell (2004)
REPRESENTATION
REPRESENTATION
Physical
Domain
CLIOS
6. Identify Performance Measures and
Refine System Goals
EVALUATION/ DESIGN
Regional
Planning
Architecture
Regional Strategic
Planning Process
Strategic
Options
EVALUATION
& DESIGN
Congestion
7. Identify & Design Strategic
Options for System Performance
8. Flag Important Areas of
Uncertainty
Regional
Infrastructure
Fleets
Land
Use
Technology
ITS
Pricing
Finance
Environmental
Policy
Operations
Planning
9. Evaluate Strategic Options and Select
Robust Ones that Perform "Best" Across
Uncertainties
Regional Operating
Architecture
Operations
Process
IMPLEMENTATION
© 2004 Sgouris Sgouridis, Engineering Systems Division, Massachusetts Institute of Technology
IMPLEMENTATION
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Implementing the Framework (A View)
Partial CLIOS Diagram for
the Transportation Layer
CLIOS Sub-systems
(Layering)
Expanding
GDP
Economic Activity
Intermodal
Connections
Resident and
Workplace
location
Highway
Network
Land Use
VMT
Vehicle
Emissions
Environment
Physical
Domain
CLIOS
Highway
Infrastructure
Highway
Operations
Funding
Allocation
Transportation
Sp Map
he
re ping
to
pla
n
Institutional Sphere
Map
Congestion Charging
Emission Regulations
State DOT
e
Federal DOT
EPA
Source: Sussman, Sgouridis and Ward (2004)
© 2004 Sgouris Sgouridis, Engineering Systems Division, Massachusetts Institute of Technology
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SCM / RSTP Interfaces
© 2004 Sgouris Sgouridis, Engineering Systems Division, Massachusetts Institute of Technology
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SCM / RSTP How is it viewed?
•
•
Porter: management of supply chains can
provide regional competitive advantage
Transition to the new economics of regional
competition:
1.
2.
3.
4.
5.
macroeconomic to microeconomic,
productivity growth to capacity to innovate,
from economy-wide policies to clusters,
from internal to external company success,
from separation of economic and social policy to
integration, and
6. from national to cross-national, regional and local.
© 2004 Sgouris Sgouridis, Engineering Systems Division, Massachusetts Institute of Technology
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SCM / RSTP How is it viewed? II
• Building the facilities may not be enough:
industry coordination needed.
– [Examples Alameda Corridor (USA),
Zaragoza Logistics Center (Spain), Port of
Tanjung Pelepas (Malaysia)]
• Other relevant work (US DOT Freight
Planning, Mobility Report 2001, EU White
Paper on Transportation, Moving the
Economy (Canada).
© 2004 Sgouris Sgouridis, Engineering Systems Division, Massachusetts Institute of Technology
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SCM / Economic Growth: Ambivalence
• SCM allows for flexibility in the supply
chains (outsourcing).
• Globalization implies that the region could
accept both gains and losses.
• Not all regions can become logistics
hubs.
© 2004 Sgouris Sgouridis, Engineering Systems Division, Massachusetts Institute of Technology
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How Supply Chains are affected?
A Policy Inventory
© 2004 Sgouris Sgouridis, Engineering Systems Division, Massachusetts Institute of Technology
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Current Research
© 2004 Sgouris Sgouridis, Engineering Systems Division, Massachusetts Institute of Technology
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Objective
Create a framework of sustainable freight
transportation planning based on the
generic RSTP framework.
Start by architecting a simple regional
model for freight transport.
© 2004 Sgouris Sgouridis, Engineering Systems Division, Massachusetts Institute of Technology
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Introducing the Model A Region
Initially:
one product,
System Driver:
Need for
Product A
Damp/
Recycle
one self-sufficient region
City
Food Mart
Retail Outlet
(no imports / exports)
Store
Warehouse
REGION A
Warehouse
Factory
Factory A
Road
Railway
Airport
E-I
Raw
Materials
I-W
Barn
Train station
E-W
W-R
F-I
Warehouse
E-F
F-F
Supplier B
M-E
F-W
W-S
S-R
R-D
Factory A
City
Food Mart
M-F
Damp/
Recycle
F-S
Store
D-F
Barn
Raw
Materials
© 2004 Sgouris Sgouridis, Engineering Systems Division, Massachusetts Institute of Technology
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Representation Phase. Step 1:
Goal Identification.
© 2004 Sgouris Sgouridis, Engineering Systems Division, Massachusetts Institute of Technology
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Representation Phase. Step 2:
Major Sub-system Identification.
Transportation
Environment
Economy
Land Use
© 2004 Sgouris Sgouridis, Engineering Systems Division, Massachusetts Institute of Technology
Manufacturing &
SCM
25
Representation Phase. Step 3: (I)
Transportation Sub-system.
Externalities
Magnitude
Fleet
Externalities
Regulation
Transport
Regulation and
Pricing
Infrastructure
Financing
Residency
Location
Product
Demand
Factory
Location
Infrastructure
Network
Production
Output
Transport
Flows
Economy Area
Regulatory Area
Transport Area
Retail /
Warehouse
Location
Land Use Area
Regional
Strategy
Private
Strategy
© 2004 Sgouris Sgouridis, Engineering Systems Division, Massachusetts Institute of Technology
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Representation Phase. Step 3: (II)
Economy Sub-system.
Trade
Regulations
Regional
Strategy
Transport
Pricing
Private Strategy
Economic
Output
Product Pricing
Factory
Output
Factory
Location
Product
Demand
Infrastructure
Financing
© 2004 Sgouris Sgouridis, Engineering Systems Division, Massachusetts Institute of Technology
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Representation Phase. Step 3: (III)
Land-use Sub-system.
Infrastructure
Network
Residency
Location
Factory
Location
Retail /
Warehouse
Location
Damp /
Recycle
Location
Land Use
Regulations
© 2004 Sgouris Sgouridis, Engineering Systems Division, Massachusetts Institute of Technology
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Representation Phase. Step 3: (IV)
Environmental Sub-system.
Regional
Strategy
Infrastructure
Industrial and
Residential
Location
Ecosystem
and Habitat
Loss
Externalities
Regulation
Production
Process
Production
Output
Manufacturing
Emissions &
Waste
Fleet
Vehicle
Emissions
Externalities
Magnitude
© 2004 Sgouris Sgouridis, Engineering Systems Division, Massachusetts Institute of Technology
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Representation Phase. Step 3: (V)
Manufacturing
Sub-system.
Product
Demand
Private
Strategy
Competition
Product
Pricing
Product
Design
Profitability
Production
Output
Externalities
Regulation
Raw
Materials
Production
Process
Supply Chain
Methods
Transport
Costs
Transport
Regulations
Transport
Pricing
Trade
Regulations
Suppliers
Outsourcing
Decisions
Warehousing
Transportation
Flow
Fleet
© 2004 Sgouris Sgouridis, Engineering Systems Division, Massachusetts Institute of Technology
Retailers
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Representation Phase. Step 3: (VI)
Institutional Sphere.
Transport
Pricing
Infrastructure
Financing
Department of
Transportation
Department of
Environment
Infrastructure
Operators
Transport
Regulations
Private
Carriers
Externalities
Regulation
Regional
Strategy
Outsourcing
Suppliers
Department of
Plannning
Land Use
Regulations
Private
Strategy
Product
Design
Manufacturer
Department of
Commerce
Trade
Regulations
Profitability
Product Pricing
© 2004 Sgouris Sgouridis, Engineering Systems Division, Massachusetts Institute of Technology
Enterprise
Consumer
Groups
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Representation Phase. Step 3: (VII)
Overview
© 2004 Sgouris Sgouridis, Engineering Systems Division, Massachusetts Institute of Technology
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Representation Phase. Step 4:
Table Error! No text of specified style in document.-1 A Possible Clustering of the Link Matrix for
Model A
Describe
Components
and
Links:
Link Matrix
Analysis
6
4
5
3
1
2
(i) Location
and
Networks
(ii) Functions
and
Regulations
© 2004 Sgouris Sgouridis, Engineering Systems Division, Massachusetts Institute of Technology
(iii) Supply
Chain and
Market
(iv) Government
and Groups
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Key
REG: Regulation
DES: Design
LU: Land Use
SC: Supply Chain
Representation Phase. Step 5:
Process Environmental
Regulation (or Pricing)
Strictness (REG)
Seek Insight
About
System
Behavior
(System
Dynamics
Support)
Depreciation
Capacity
Acquisition
Regulatory dependence
of production process
+
Production
Process
Changes
+
Transport Flow
(Raw->Factory)
+
Raw Material
Inventory
Raw Material
Extraction
+
B
Production
Capacity
+
Production
Effluents
Product
Manufacturability
(DES)
+
+
+
+
-
Products in
Process (PIP)
Production
Start Rate
Transport Flow (Factory
-> Warehouse -> Retail)
+
Final Product
Inventory
Total
Inventory
+
Warehouse
Inventory
Shipment
Rate
Production
Rate
+
Retail
Orders
Reuse
Retail
Inventory
Demand - Capacity
Differential
Product Appeal
(DES)
+
Products in
Use
Sales
+
Discarded
Products
Failure
Rate
+
B
+
Discarding
R
Economic
Output
-
-
Economy
growth
Product Demand
+
Regulation (or Pricing)
Strictness (REG)
Product
Pricing
+
Transport cost
per shipment
+
+
Fuel
Cost
+
+
Transit
Time
B
Transport Cost Flow Equilibration
Congestion - Flow
Equilibration
Fossil Fuel
Reserves
Fuel Use
-
+
+
Transport
Emissions
Infrastructure
wear
+
+
+
Transport Flow
Total (Ton-km)
-
+
Vehicle Efficiency
Mandates (REG)
+
-
Infrastructure
Capacity
Passenger
Traffic
+
+ Efficiency
Fuel
(ton-kms/liter)
Infrastructure
Investment
Congestion-
+
Shipment Consolidation -Modal Choice (SC)
Emission
Restrictions (REG)
Maintenance
+
B
+
Total
Inventory 0
Supply Demand
Equilibration
+
Depletion
rate
B
-
Fuel Tax
(REG)
Product
Recyclability (DES)
+ End-of-life Environmental
Price
Demand
Equilibration +
-
+
Products in
Landfill
Transport Flow
(Consumer -> Landfill &
Recycle)
B
Recycled
products
+
Recycling
Rate
Transport Density
(Tons/shipment)
+
Average Distances (e.g.
Factory to warehouse) (LU)
© 2004 Sgouris Sgouridis, Engineering Systems Division, Massachusetts Institute of Technology
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Design and Evaluation Phase. Step 6:
Need – Metrics
Matrix
© 2004 Sgouris Sgouridis, Engineering Systems Division, Massachusetts Institute of Technology
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Further Research
© 2004 Sgouris Sgouridis, Engineering Systems Division, Massachusetts Institute of Technology
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Steps forward
• Iterate insights from the modeling process by
identifying critical areas of intervention.
• Complete the design and evaluation phase of
CLIOS for model region.
• Expand model to include imports and exports
(Malaysia as target region is major exporter) and
more products (competition).
• Refine SD model.
• Expand SD model into simulation for
quantification of policy effects.
• Transfer insights to existing regions (Malaysia).
© 2004 Sgouris Sgouridis, Engineering Systems Division, Massachusetts Institute of Technology
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Your Feedback
© 2004 Sgouris Sgouridis, Engineering Systems Division, Massachusetts Institute of Technology
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(Some) References
Sussman, J. and C. Conklin. (2000). “Regional Strategies For The Sustainable Intermodal Transportation Enterprise
(ReS/SITE): Five Years of Research.” In Transportation Research Record: Journal of the Transportation
Research Board TRB Record, TRB Paper Number: 01-0302.
Runhaar, H. (2002). “Freight Transport: at any price?” Doctoral dissertation. Delft University. DUP Science. Netherlands.
Pendleton, T.A. (1998). Regional Architectures: Definition and Integration into the Strategic Transportation Planning
Process. Unpublished thesis. MIT.
Dodder, R, J. Sussman and J. McConnell. (2004). The Concept of the “CLIOS Process”: Integrating the Study of
Physical and Policy Systems Using Mexico City as an Example. Presented at the MIT Engineering Systems
Symposium, 29-31 March, at MIT, Cambridge, Mass.
Simchi-Levi, D., P. Kaminsky, and E. Simchi-Levi. (2003). “Designing and Managing the Supply Chain: Concepts,
Strategies and Case Studies.” 2nd Edition. McGraw Hill.
Ogden K.W. (1992). Urban Goods Movement. Cambridge University Press.
Hall, R. and J. Sussman. (2004). “Sustainable Transportation – A Strategy for System Change.” Under review for the
International Journal of Sustainable Development.
Polenske, K. (2001). “Competitive Advantage of Regional Internal and External Supply Chains.” In Regional Science
Perspectives in Economic Analysis, Benjamin H. Stevens, edited by Michael L. Lahr and Ronald E. Miller,
Amsterdam, The Netherlands: Elsevier Science, B.V., pp. 259-284.
Lakshmanan, T. R. and W. P. Anderson. (2002). “Transportation Infrastructure, Freight Services Sector and Economic
Growth.” A White Paper prepared for The U.S. Department of Transportation, Federal Highway Administration.
Center for Transportation Studies. Boston University. Available at:
http://www.ncgia.ucsb.edu/stella/meetings/20020115/Lakshmanan.pdf. Accessed Aug. 2004.
Ward, J. (2004). “Current Regional Strategic Transportation Planning Practice: Shortcomings and Solutions.” Internal
report. MIT.
Sussman, J., S. Sgouridis, and J. Ward. (2004). “An Engineering Systems Approach to Transportation Planning:
Regional Strategic Transportation Planning as a CLIOS.” Under review for publication at the 84th Transportation
Research Board Annual Meeting. January 2005. Washington DC.
Porter, M. (2001). “Regions and the New Economics of Competition,” In Global City-Regions, edited by Allen J. Scott.
New York: Oxford University Press, pp. 139-157.
Grube J.W. (2001). Regional Competitive Advantage and Transportation Planning: An Extended ReS/SITE Framework.
Unpublished thesis for the Master of Science in Transportation, MIT.
Miller, G., D. Kiguel and S. Zielinksi. (2003). Moving Goods in the New Economy: a Primer for Urban Decision Makers.
Moving the Economy (MTE) and Canadian Urban Institute. Toronto, Canada.
Design Structure Matrix Website. (2004). Available at http://www.dsmweb.org/. Accessed Aug. 2004.
© 2004 Sgouris Sgouridis, Engineering Systems Division, Massachusetts Institute of Technology
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