The impact of capacitated logistics operations on supply chain dynamics
Abstract
In this work, we investigate how capacity limitations in the logistics system affect the dynamic behaviour of supply chains. We are interested not just in the well known ‘bullwhip’ effect, but also the more newly defined ‘backlash’ effect. The latter has particular implications for the shipment of goods in the supply chain. We use a simulation approach, using system dynamics, to replicate an existing four echelon supply chain model, but with the investigation of different scenarios for constraining transport capacity. The scenarios include: 1. No capacity constraints 2. Introducing capacity constraints echelon by echelon 3. All four echelons equally constrained 4. Each echelon constrained in proportion to the maximum shipment required according to Scenario 1 5. A whole systems view of the total available capacity in the supply chain. The results indicate that transport capacity limitations negatively impact on inventory and backlog costs, although there is a positive effect on the ‘backlash’ effects. This improvement results in an increase in transport utilisation. Another finding is the simultaneous occurrence of backlogs and inventory, which does not arise with the uncapacitated scenario. The managerial implication of our work is that there is a requirement for transport operators in each supply chain echelon to ‘vertically’ collaborate.