Imagine an aqua farmer’s cooperative called “Blue Ocean Co-op”. Its member farmers sell what they grow and harvest at their ocean farms to the cooperative, and the co-op focuses on finding customers and delivering the seafood to those customers. The co-op also finds suppliers to provide operating supplies for the farmers. You have been hired to create a sustainable and responsive supply chain to support this business, and help it grow and make a profit.
The co-op depends on its supply chain to get what it needs to operate, and to deliver its products to customers. The screenshot below shows a map or model of the co-op’s supply chain. It shows the main co-op facility, the aqua farms, and the customers, and suppliers. These facilities plus the transportation routes that connect them define the supply chain. This supply chain and case study are part of a real project currently underway in California: Project Blue, AltaSea at the Port of Los Angeles.
Model of the Blue Ocean Co-op supply chain (click on screenshot for larger image)
NOTE: This is an advanced case. Work through the three challenges of the beginning case, “Cincinnati Seasonings” before taking on the challenges in this case.
[ If you have an SCM Globe account, you can import a copy of the “Blue Ocean Co-op” supply chain into your account from the online library If you are an instructor, you can request a free evaluation account on SCM Globe. You can also request the instructor study guide for this case – send email to info@scmglobe.com ]
Modeling the Blue Ocean Supply Chain
This model is created by defining combinations of the four supply chain entities: Products; Facilities; Vehicles; and Routes.
Products – There are four categories of products: 1) Seaweed; 2) Mussels and Clams; 3) Fin Fish and Scallops; and 4) Operating Supplies. Information about those products is shown in the Product menu. When you click on those products you open dialog boxes with product data as shown below. These products show data for the case sizes in which those products are shipped.
Dialog boxes showing data for products in the supply chain
Facilities – There are the different aqua farms, the Blue Ocean Co-op, and the wholesale distributors and suppliers you do business with. Click on a facility icon or on its name in the facility menu to see and change information about that facility. Turn on the satellite view and zoom in to see where each facility really is, or where it is planned to be.
Satellite view showing location of the main Blue Ocean Co-op facility (click on screenshot for larger image)
Current data is shown for each facility in the initial supply chain model. You can change some of the facility data as needed to create a good 30-day supply chain operating plan. You can also track carbon generated by facilities.
Vehicles – When you click on a facility you can see if there are vehicles based at the facility. If you see one or more blue route lines emanating from a facility when you click on it then you know it has vehicles. Go to the vehicles menu and click on the vehicles to see information about these vehicles. As with facilities, you can change some of this information as needed to create a new supply chain. You can also track carbon generated by these vehicles to get a good idea of the supply chain’s carbon footprint.
Routes – Each vehicle is assigned one or more delivery routes that it follows in order to move products between facilities. These delivery routes can have one or many stops where they drop off or pick up products at facilities. In this case boat vehicles each have only one stop because they bring out people to work at each farm and they bring back those people plus the products they harvested each day at their farms.
Simulating the Blue Ocean Supply Chain
Now that you’ve checked out the products, facilities, vehicles, and routes that make up this supply chain, the next step is find out how well it works. Run a simulation of this supply chain and see what happens. The simulation shows that the current supply chain runs for two days and then a problem happens, as shown below.
You have run out of mussels and clams in SF Wholesaler 1. What can you do to keep this customer supplied with mussels and clams and other seafood products?
The truck that delivers products to SF Wholesaler 1 (and SF Wholesaler 2) is based at the the Blue Ocean Co-op facility. So you click on that facility, and then click on Vehicles to see the vehicles based there. When you click on each vehicle you can see it’s route. When you click on Seafood Truck 1 that vehicle dialog box opens and this route shown in the screenshot below appears. When you click on Routes and select that route, it opens the dialog box for that route and you can see the details of how that route operates.
Create a 30-Day Operating Plan for the Blue Ocean Supply Chain
The existing supply chain has problems, as the simulation just showed. Forecasted product demand is already entered into the model and shows as product demand at the different facilities (product demand forecasts are provided every month by sales and marketing people at the coop). As the supply chain manager, it’s your job to find good ways to deliver the products needed to meet that demand.
When you get this supply chain model to run in simulations for 30+ days, you will also have created a monthly operating plan — the supply chain model is the operating plan. It defines what needs to be done to keep the supply chain running for the next 30 days. The better the model performs in simulations, the better the operating plan will perform in the real world!
To get to 30 days, you will need to make some changes to this initial supply chain model. First you need to make a change to fix the problem of running out of mussels & clams at SF Warehouse 1. Do this by increasing the drop quantity for that product at SF Warehouse 1. How much mussels and clams do you think you should drop off at SF Warehouse 1 to keep up with their demand? The answer is to make your best guess and enter it into the model (Drop Qty for Mussels & Clams at SF Wholesaler 1). Then run a simulation and see what happens. Adjust as necessary.
As you fix one problem, the simulations will find other problems. Simulations show what’s happening day by day with the supply chain operations. On the supply chain map you see vehicles moving on their delivery routes, and there are graphic and numeric displays of financial and performance data. Use this information to help you analyze problems that arise and figure out ways to fix them. Your goal is to get this supply chain to meet demand and run for 30+ days, while also minimizing operating costs and on-hand inventory at the co-op. To make that happen you can make changes to things such as:
- customer delivery amounts and frequencies for co-op products
- supplier delivery amounts and frequencies for operating supplies delivered to the co-op
- delivery amounts and frequencies for bringing operating supplies from the Aqua Center to the aqua farms
- pickup quantities of products from the aqua farms for delivery to the Aqua Center at Long Beach Harbor
- storage capacities at the facilities
There are lots of ways to fix problems. Some ways work better than others. The simulations show what works best.
Create Performance Reports from Simulation Data
When you get your simulation to run for 30+ days you can download the simulation data to a spreadsheet reporting template. This template will use your simulation data to create a simple Profit & Loss Report plus KPIs (Key Performance Indicators) that measure profit and operating efficiency of your supply chain. This provides an objective basis to compare different supply chain designs. See an example of a P&L Report and KPIs in the screenshots below.
In the reports above you can see that operating profits are negative. Can you make changes and improvements to this supply chain so that operating profits turn positive? In addition to cutting costs you also need to increase revenue from sales to end use customers like the seafood wholesalers and the cattle feed and fertilizer company. How much of a profit can you earn if sales to these existing customers increased by 20%? Are you producing enough seafood and seaweed to meet customer demands? How would you deliver the increased amounts of products to these customers?
Use Simulations, P&L Reports, and KPIs to Explore Options
What if a new seafood wholesaler in Thousand Oaks, and a new fertilizer company in San Fernando began buying from Blue Ocean Co-op, how would you make deliveries to those new customers? Assume demand in Thousand Oaks is the same as demand in Santa Monica, and demand in San Fernando is the same as the existing Cattle Feed & Fertilizer company. Update you model of Blue Ocean supply chain to reflect these new developments.
What happens to the vehicle carbon footprint as the supply chain expands and moves more products between facilities? What can you do to manage the vehicle carbon footprint?
Download a copy of the Blue Ocean Co-op reporting template here. See how to import simulation data into a spreadsheet reporting template in “Analyzing Simulation Data“, scroll down to the heading “Export Simulation Data to Your Computer“.
[If you are using SCM Globe Professional version, these reports can be generated automatically by clicking on the “Generate P&L Report” button on the Simulate Screen]
Register on SCM Globe to gain access to this and other supply chain simulations. Click on the blue “Get Started Now!” button in the middle of our home screen. Scan the short videos and tutorials in the Getting Started section. In 15-30 minutes you will be ready to start using the simulations. Instructors can request a free SCM Globe trial demo to evaluate using these simulations in their classes.