A Simulation Model to Analyze the Impact of Outsourcing on Furniture Supply Chain Performance

Abstract

As increasingly more companies outsource to Asia, US furniture companies' supply chains are becoming longer. To make their logistics networks more efficient, companies need to choose the right supply chain model, promote cooperation with their partners in the supply chain, and adopt new technologies to make better decisions and to manage better. Discrete-event simulation models are powerful tools that can be used by furniture manufacturers to perform what-if types of analyses to estimate the impact of their decisions on the overall performance prior to making any real changes to their system. We developed such a simulation model for a typical furniture manufacturer in northeastern Mississippi. By simulating the supply chain of the manufacturer under various scenarios, we show that outsourcing all of the business is not necessarily the best option because it may lead to a local reduction of capacity. This capacity reduction impacts the flexibility and profitability of the manufacturer. Outsourcing decisions may also be affected by product type. In general, outsourcing labor-intensive, slow-moving, and easy-to-transport items makes sense.

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