Strategic Design of Robust Global Supply Chains: Two Case Studies from the Paper Industry, 2004 Engineering, Pulping, and PCE&I Conference

To remain competitive in today’s competitive global economy, corporations must constantly improve their global logistics strategy, modify their supply chain configuration, and update their tactical production and distribution planning to respond to changing economic and market conditions. Capital budgeting decisions have to be made long before all the relevant data are known with certainty. Evaluation of the capital investments and supply chain configurations has to be consistent with generally accepted accounting principles and financial reporting, incorporate global trade and taxation laws and regulations, and be compatible with the risk preferences of the corporation. To make these difficult strategic decisions in a timely manner, decision makers no longer can rely exclusively on qualitative reasoning but must use a quantitative, optimization-based design methodology. The combination of modeling and solution methodology provides for the first time a scientific method to evaluate the financial tradeoff between additional investment cost and more stable operational costs when configuring industrial global supply chains.

In this presentation the characteristics of global supply chains of manufacturing companies will be reviewed. The advantages and disadvantages of using strategic modeling tools to assist decision making in supply chain configuration projects will identified. Special emphasis will be placed on configuring robust supply chains that perform well under changing conditions. Finally, lessons learned from several supply chain design projects for companies in the paper industry will be discussed.