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FOR SIMULATION
Muriati Mukhtar Awaluddin Mohamed Shaharoun
Department of Industrial Computing Mohd Shariff Nabi Baksh
Faculty of Technology and Informatiuon Science Faculty of Mechanical Engineering,
Universiti Kebangsaan Malaysia Universiti Teknologi Malaysia
43600 UKM, Bangi, Selangor, Malaysia Locked Bag 791, 80990 Johor Baharu,
mm@ftsm.ukm.my Malaysia.
Buyer Buyer
Buyer dominated
dominance dominated
Arms
length collaboration
Arms True
Power
Symmetrical Length collaboration
Supplier
Supplier Supplier
dominance dominated
dominated
Arms
collaboration
Length
Low High
Collaboration
the chain of which the closeness of the terms. This would enable us to then investigate
relationship is one of two defining factors. the tradeoffs or effects of such types of
(Pilling and Zhang 1992) stated that long-term relationship structures on supply chain
cooperation appears to produce more net benefits performance. With this in mind, in this section
for the exchange partners than are available from we will propose a stylised method of interpreting
traditional competition-based arrangements. and incorporating the relationship profiles into a
These benefits often enhanced the competitive simulation model.
position of both the manufacturer and supplier, Simulation is one of the most popular tools
resulting in a win-win situation. employed in the operational analysis of supply
Recent research (Maloni and Benton 2000; Cox chains. The existence of various supply chain
2001) uncovers the role of power and how it simulation studies (Hieta 1998; Bagchi et al.
affects the relationship strengths and hence the 1998;Ingalls and Kasales 1999; Archibald et al.
performance of the supply chain. Hence, power 1999; van der Vorst et al. 2000), are testimony to
is a variable that cannot be ignored in the this effect. This type of analysis is valuable as
consideration of buyer-supplier relationships in companies and supply chains are always trying
the supply chain. With this in mind, and taking to continually improve their performance. In
note of the fact that a supply chain relationship addition to this type of analysis we feel that
might be anywhere in the continuum of arms simulation can be used as a tool to investigate or
length to full collaboration, the two variables i.e corroborate the claims made by the conceptual
power and degrees of collaboration, can give rise literature for example (Piling and Zhang 1992
to particular relationship structures as shown in and Spekman et al. 1998), purporting the
Figure 1. benefits and tradeoffs of the different types of
buyer-supplier relationships. In this respect the
conceptual literature can be used as a source for
RELATIONSHIP MODELLING indicators that characterize certain types of
CONSTRUCTS relationship. For example, Spekman et al (1998)
listed high levels of information sharing together
The relationship structures described in the with trust and commitment as indicators of a
previous section are abstract qualitative close collaborative relationship.
concepts. It would be beneficial if such concepts
could be interpreted or expressed in quantitative
This is utilised for example, by Gavirneni (2001) ordering patterns of the retailer and true demand
who used information pertaining to inventory patterns of the retailer’s customers.
levels and the willingness of the retailer to However, besides inventory levels and demand
transfer its inventories as indicators of information, other types of information can be
cooperative behaviour. The author considered shared in the supply chain. Lee and Whang
three models, which represented three levels of (2000) described various types of shared
cooperation. In the first model of no co- information including: Inventory levels, sales
operation, he assumed that, there is no data, order status for tracking, sales forecast,
information sharing between the retailers and the production/delivery schedule, performance
supplier. In this case the only information metrics and capacity information. Besides
available to the supplier is via the orders placed information, speculative and postponement
by the retailers. In the second model the author behaviour can also be considered when
assumed that there is some cooperation in the modelling supply chain relationship behaviour.
supply chain. Here, in addition to the orders Postponement and speculative supply chain
placed by the retailers, the supplier also received strategies (Pagh and Cooper 1998) can be used to
information on the current inventory levels of the represent power variables in a supply chain
retailers. In the third and final model, the author (Mitra 1997). In addition we can also consider
further extends the assumptions made in the five areas where power can be exercised in a
second model to include the possibility of supply chain namely pricing control, inventory
transfer of inventory from one retailer to another. control, operations control, channel structure
This they contend represents complete control and information control (Munson et al.
cooperation in the supply chain. Xu et al (2001) 2000). Incorporating these considerations we
contends that a successful implementation of a could then develop various constructs to
coordination program means that the represent the different relationship profiles. For
manufacturer gains equal access to the retailer’s example, we can represent the types of
actual demand information, adopts a one forecast relationship in Figure 1 by using sharing of
policy for both parties and determines the order demand information as an indicator of
releases for both parties. This is in contrast to the collaborative behaviour and the choice of
case where there is no collaboration. In such postponement or speculation strategies as an
cases the manufacturer relies on historical order indicator of power. An example of these types of
data from the retailer to predict both future constructs is depicted in Figure 2.
Figure 2:Relationship Constructs