Simulating The Impact Of Operational, Logistical And Contractual Factors In The Financial Performance Of Aerospace Supply Chains

One of the key drivers in successful outsourcing decisions is the achievement of cost benefits for stakeholders across the supply chain. It is well established that enhancing the efficiency of operational and logistical activities can improve financial performance and there is an increasing awareness of the need to understand the relationship between the financial performance of supply chains, the activities that occur within them and the external factors that can influence them. To address this, the cash conversion cycle (CCC) is becoming a popular metric in supply chain management as it connects the activities performed by supply chain members to the cash flow between them.
This paper uses a Design of Experiment methodology to identify the influence of the operational, logistical and contractual variables encountered in manufacturing supply chains on financial performance, specifically the CCC, inventory holding costs, and free cash flow (FCF). A discrete event simulation model of an aerospace subassembly line is used as an exemplar. The results lend credibility to using the Taguchi Method although its suitability depends on the format of the metrics used. The results also suggest the need to model variable cycle times for operations and logistics depend on inventory levels in the system.