Universidad Tecnológica de Nuevo Laredo

Student: Luis Fernando Gloria Vasquez

Teacher: Ricardo Ramirez Aguilar

Subject: Supply Networks Design

Grade and group: 8.c

Friday 20TH MAY 2022

3 different types of supply chain design approach ( trial and error, heuristic, and optimization)

SUPPLY CHAIN TRIAL AND ERROR

The ‘trial and error’ method to define or adjust supply chain management cannot be a viable
option as pharmaceutical products are normally used to treat serious diseases, thus their
availability – or lack thereof – is often a matter of life or death. Therefore, precise forecasting
and efficient planning are of particular importance for these industries, and the weakness of these
processes can generate unacceptable high levels of uncertainty in terms of output and long lead
times.

The combination of these factors implies that in order to provide an adequate service to
customers, it is necessary to have risk mitigation strategies such as strategic inventory levels
and/or excess capacity.
However, an increase in excess capacity leads to increased operating costs.

Defining the difference between heuristics and optimization

Fundamentally, every supply chain planning and scheduling problem is at heart an optimization
problem. Its solution involves determining the best way to synchronize supply and demand
across the supply chain network – to boost customer satisfaction and bottom-line results.
One popular technique that businesses employ to solve their supply chain planning and
scheduling problems is heuristics. Simply put, a heuristic is a problem-solving approach that
utilizes a practical process (commonly referred to as “rule of thumb” or “best practice”) to
produce a feasible solution that is good enough to quickly solve a particular problem and achieve
immediate goals – but not necessarily an optimal solution.
In contrast, an optimization model employs an intelligent, automated process to generate an
optimal solution to a particular problem – taking decision variables such as production,
inventory, and shipment quantities as well as constraints and key performance indicators (KPIs)
into account.
Supply chain optimization solutions aim to offer the best possible avenue to achieve optimal
performance across your procurement, production, inventory, and distribution operations –
maximizing delivery performance and overall profitability.

The pros and cons of the heuristic approach

The main advantage of adopting a heuristic approach is that it offers a quick solution, which is
easy to understand and implement. Heuristic algorithms are practical, serving as fast and feasible
short-term solutions to planning and scheduling problems.
The main downside of the heuristic approach is that it is – in the vast majority of cases – unable
to deliver an optimal solution to a planning and scheduling problem.
Heuristic approaches can offer a quick fix to a specific planning or scheduling issue, but are not
capable of serving as viable solutions that deliver the best possible results.
Another disadvantage is the lack of flexibility that heuristic approaches possess. If, for example,
key decision variables, constraints or KPIs change, or if a new machine is added to the
production line that shifts the bottleneck in the production process, a hard- or pre-coded heuristic
may no longer be capable of serving as a valid and viable solution and might need to be
reconfigured.

The pros and cons of the optimization approach

The main advantage of the optimization approach is that it produces the best possible solution to
a given planning and scheduling problem.
Indeed, optimization algorithms are guaranteed to generate optimal solutions, which outperform
their heuristic counterparts and enable businesses to maximize cost- and operational-efficiency.
One of the chief benefits of optimization models is their flexibility, as they can automatically
adjust and adapt to take into account the myriad decision variables and changing goals,
constraints, and complexities in any business environment and generate the best possible
planning and scheduling solutions.
There are, though, some disadvantages to the optimization approach. Firstly, optimization
models are highly sophisticated, and specific expertise and technologies are required to devise
and deploy optimization solutions.
For example, in order to generate an optimization solution, a thorough understanding of
mathematical programming concepts and utilization of special solvers are necessary.
Also, compared to their heuristic counterparts, optimization algorithms typically take more time
to execute – as they are mathematically difficult to solve.
Furthermore, some real-world processes cannot be adequately modeled using linear optimization
techniques, and it is sometimes difficult to model intangible business objectives such as
“fairness” in an optimization model.