Simulation shows that these inefficiencies can significantly affect a supply chain’s performanceA pairs strategy performs much worse than a total flexibility strategyChain configurations offer very good protection against the inefficienciesA chain strategy performs very wellA chain strategy performs very wellIf the number of stages or the number of products is very large, then an h=3 chain strategy may be advisableFlexibility guidelines for single-stage supply chainsFlexibility guidelines for multiple-stage supply chainsThe key findingsThere are two key phenomena that affect multiple-stage supply chains• Floating bottlenecks• Stage-spanning bottlenecksReference: Graves, Tomlin, “Process Flexibility in Supply Chains,” 2003.• Floating bottlenecksStage 1123Stage 2123DemandScenario ProbabilityProduct 1 Product 2 Product 3Stage 1StandAloneShortfallStage 2StandAloneShortallSupplyChainShortfall10.5100 50 150 50 0 5020.5150 50 100 0 50 50ExpectedShortfall25 25 50The expected shortfall is larger than the maximum expected stand-alone stage shortfall as the bottleneck floats between stages• Stage-spanning bottlenecksStage 1123Stage 2123Demand Product 1 Product 2 Product 3 Stage 1 Stand Alo neStage 2 Stand AloneSupply Cha i n Shortfall150 50 150 50 50 100 These two phenomena are called inefficienciesSimulation shows that these inefficiencies can significantly affect a supply chain’s performanceFigure 8 Inefficiencies for Pairs Configuration 0% 20% 40% 60% 2 3 4 5 6 Numb er of Stages Pairs, CI Pairs, CFI Pairs, CSIA pairs strategy performs much worse than a total flexibility strategyFigure 10 Configuration Loss for Pairs Configuration 0% 50% 100% 150% 200% 250% 1 2 3 4 5 6 Numb er of StagesChain configurations offer very good protection against the inefficiencies Figure 11Configuration Inefficiency For Chains0%10 %20%30%40%50%60%23456Number of Stagesh=3 Chainh=2 Chain, CIPairs, CIA chain strategy performs very wellThe maximum configuration loss for h=3 was 0.34% Figure 13 Configuration Loss for Chain Configuration 0% 5% 10% 15% 20% 1 2 3 4 5 6 Numb er of Stages h=3 Chain h=2 ChainA chain strategy performs very wellFigure 14 Configuration Loss for Chain Configuration 0% 50% 100% 150% 200% 250% 1 2 3 4 5 6 Numb er of Stages h=3 Chainh=2 ChainPairsIf the number of stages or the number of products is very large, then an h=3 chain strategy may be advisableFigure 15 Configuration Loss for h=2 Strategy as the Number of Stages and Products Increase 0% 50% 100% 150% 200% 250% 300% 0 5 10 15 20 25 Numb er of Stages Num Prod = 10 Num Prod = 20 Num Prod = 30 Num Prod = 40Flexibility guidelines for single-stage supply chains• Try to create chains that encompass as many plants and products as possible (ideally all plants and products would be part of one single chain)• Try to equalize the number of plants (measured in total units of capacity) to which each product in the chain is directly connected• try to equalize the number of products (measured in total units of expected demand) to which each plant in the chain is directly connected.Flexibility guidelines for multiple-stage supply chains• The guidelines for single-stage supply chains should be followed to create a chain structure for each of the supply chain stages.• In supply chains with a large number of products or stages, additional flexibility is advisable, especially for stages in which the capacity is not much greater than the expected demand.• This extra layer of flexibility should again be added in accordance with the above guidelines to create another chain structure overlaying the initial chain structure.The key findingsMultiple-stage supply chains suffer from two types of inefficiencies that affect performanceBUTA similar strategy of using chain configurations still works very