Profit, bottlenecks, simulation, and being wrong

Improving reliability and profitability of integrated steel supply chain with simulation

How much will profit increase without this bottleneck? Or how about – If we invest in debottlenecking the whole production line, can we meet our targets? Simple questions and a common approach, but if you were to ask Dr. Alan Barnard, CEO Goldratt Research Labs, the answers may not be what you expect.

As a world leading decision scientist and Theory of Constraints (TOC) expert, Dr. Alan Barnard, is uniquely placed, with extensive research and industry practice, to demonstrate why debottlenecking can lead to unprofitable chaotic systems and why investments often fail to deliver their expected ROI. Moreover, better results can be achieved faster and more frequently when TOC is applied.

At the AnyLogic Conference 2018, Dr. Alan Barnard introduced a presentation on how an integrated steel supply chain improved its reliability and profitability with the help of TOC and simulation modeling.

In common with much of the steel industry, the producer had made a series of investments to increase service levels and profitability without achieving the expected ROI. And, like many, they had focused on asset utilization, cost-reduction and debottlenecking. In a bid to avoid another repeat of these failures, they changed their approach.

Steel mill

The presentation demonstrates three of the four models constructed by Jaco-Ben Vosloo, VP of Technology at Goldratt Research Labs, and Andrey Malykhanov, managing partner of Amalgama LLC, that were used to support decision making throughout the steel manufacturers supply chain. The insight provided by this simulation-based decision support tool led to reduced costs, higher reliability, and greater profit. Part of this success may have come from the simulation models helping to reduce change resistance.

Breaking change resistance

When big changes may make no difference and small changes can possibly have a large impact, it is natural for many decision makers to minimize risk and justify why not to make changes. This may be safe, but it does not help improve competitiveness. The solution is to provide a safe place to fail – where ideas can be tested and intuition developed. This is what AnyLogic and its simulation environment provides.

AnyLogic simulations helped show that removing a bottleneck at a local level may make the situation worse at a global level and that the global rules necessary for success can be counterintuitive. By examining the processes and supply chain in simulation, the decision-makers could develop their intuition and determine the rules they needed to meet their KPI. Insight from the project even helped challenge an industry paradigm.

This video of the presentation gives background to the problems, explains the challenges, highlights the influences on design, and demonstrates the impact of the solution.

Dr. Alan Barnard introduces Goldratt Research Lab's ALC 18 presentation on improving reliability and profitability in a steel supply chain.

To find out more about the project and view the models in more detail, read the Improving reliability and profitability of integrated steel supply chain with simulation case study.

⚡ The 2019 AnyLogic Conference is in April and will feature a wide variety of presentations from world leading simulation practitioners. In a new development for the conference format, this year also brings an expert-led panel discussion: Next Generation Artificial Intelligence: Agent-Based Simulation + Reinforcement Learning.