System Dynamics Simulation to Test Operational Policies in the Milk-Cheese Supply Chain Case study: Piar Municipality, Bolivar State, Venezuela.

Abstract

With the purpose of detecting the impact that variations of demand cause in the milk-cheese supply chain, and determining how the operational policies of capacity, inventories or labor force can mitigate this impact, a system dynamics simulation model has been designed based on a survey conducted on a sample of cheese manufacturers and their links with milk farms, transportation companies and cheese distributors. This supply chain will be consolidated when a milk center that will collect the raw milk is completed. From this center, and after adequate treatment, milk will be distributed to the different cheese manufacturers in the supply chain. Managing adequately the milk-cheese supply chain represents an important challenge due to the short life of these products. Although this study was done in a region in Latin America, its results can be applicable to food supply chains by introducing some modifications. The milk-cheese supply chain in this case study contemplates three milk producers, one milk center, five cheese producers and several distributing agents. These companies operate individually under normal conditions, but they have understood that their integration in a supply chain improves the competitiveness of all its members. That is to say, the sum is greater than the parts. For its initial design a simulation software model is used in which there sources of the supply chain are optimized. Later the product of this optimization facilitates some initial values to be used in the system dynamics model in which cause effect or influence relationships have been previously established considering the most representative variables. Finally, changes in operational policies that can reduce the level of pending orders in the supply chain are tested using other simulation software. The main contribution of this research is that it can serve as support or contribute to reduce the uncertainty in the decision making process of the supply chain management due to the speed with which individual or combined policies can be analyzed. In response to a variation of demand the most adequate policy may be selected and that can be done before the policy is implemented.