James S. Noble, Adam Rubemeyer, Kara Bono, Kelsey Kotur, Wooseung Jang
University of Missouri
This project evaluated the current state-of-the-art for supply chain models with respect to energy issues and then examined a representative Boeing supply chain in order to determine the relevant trade?offs. The literature review found very few models that explicitly incorporated energy issues, though there is the potential to extend them to include energy issues. Based upon this analysis new models were developed that explicitly consider energy conservation issues throughout the supply chain – both an evaluation model and an optimization model.
Supply Chain Planning and Execution is based on several key variables for determining optimal transportation nodes, modes and routes with respect to meeting cost and service requirements. However, a growing concern is the impact of energy consumption issues within supply chain network configuration, transportation network design, transportation source selection and operation. With long-term projections through 2030 showing increased energy costs within the transportation sector (International Energy Outlook 2008, US Department of Energy) the potential economic impact on the cost of overall supply chain logistics is considerable. Many decisions within the supply chain configuration are impacted by the associated cost of energy (for example: supplier/vendor selection, mode selection, routing, and load consolidation). This study aims to lay the ground work for addressing this crucial issue within the supply chain domain
Based on the models developed the trade?offs between costs and service levels were explored when energy is considered with respect to issues such as supplier selection, mode selection, inventory policy, etc. For both models there is support for the premise that for certain scenarios there are supply chain decisions that are sensitive to energy cost fluctuation. In general it was found that: 1) the effect of changing fuel price is negligible on transportation mode selection; 2) the effect of changing fuel price does not significantly impact supplier selection when part cost is not dominated by transportation cost; 3) The effect of changing fuel price can significantly impact ordering policy depending on the location and freight class of the product. This insight goes against a lean approach which has as its primary objective to minimize inventory and does not explicitly consider the overall cost associated with an ordering policy.