Abstract Code: 011-0533

Designing a Simulation Laboratory Environment for

Service-Oriented Supply Chain Information Management
Stephen C. Shih1
Chikong Huang2

Associate Professor & Associate Director,

School of Information Systems and Applied Technologies
Southern Illinois University
Carbondale, Illinois 62901-6614, USA
E-mail: shihcs@siu.edu, Phone: (618) 453-7266
2

Professor, Department of Industrial Management,

Institute of Industrial Engineering and Management,
National Yunlin University of Science & Technology,
123 University Road, Section 3, Touliu, Yunlin, Taiwan 64002, R.O.C.
E-mail: huangck@yuntech.edu.tw, Phone: 886-5-5342601 ext. 5336

POM 20th Annual Conference

Orlando, Florida U.S.A.
May 1 to May 4, 2009

Designing a Simulation Laboratory Environment for Service-Oriented Supply Chain

Information Management

Abstract
The primary objective of this research is to propose a simulation laboratory environment to
examine the interactions and information exchanges between various levels of the serviceoriented supply chain network. The research involves the exploration of three areas: (1) the
essential characteristics and associated requirements underlying various service-driven supply
chain transactions, (2) business assumptions underlying conventional service-driven supply chain
models, and (3) modeling theories adopted to redefine the new models. Furthermore, the
laboratory will be used as a viable base to develop fundamental theories for improved network
communications and increased operational efficiency. An important thesis of this research is to
explore the synergy between service supply chain logistics and information exchange.
Ultimately, this research has the potential to extend simulation techniques and information
technology to an important economic sectorthe the service sectorthat has long been
overlooked in the past.

Key Words: service-driven supply chain management and logistics, service supply chain
information management, and simulation.

1. Introduction
The primary objective of this research is to propose a framework and information technology
architecture for the design of a simulation laboratory environment to examine the interactions
and information exchanges between various levels of the service-oriented supply chain network.
The proposed simulation laboratory, Integrated Service Enterprise Systems Laboratory (ISES
Lab), will provide an environment for researchers and students in various disciplines, including
production and operations management, operations research, industrial engineering, and
information systems, to conduct research in a number of areas related to service supply chains
(e.g., exploration of the essential characteristics underlying service-driven supply chain
transactions). The ISES Lab will be further used as the viable bedrock for development of
theories on service supply chain network communications and information management.
The research conducted in the laboratory involves the exploration of three areas: (1) the
essential characteristics and associated requirements underlying various service-driven supply
chain transactions, (2) business assumptions underlying conventional service-driven supply chain
models, and (3) modeling theories adopted to redefine the new models. The lab research projects
will help explore the synergy between service supply chain logistics and information exchange.
This synergy has presented an unprecedented territory of innovation and challenge. Ultimately,
the research work and resulted nourished from the lab has the potential to extend simulation
techniques and information technology to an important economic sector, the service sector, that
has long been overlooked in the past.

2. Service Enterprise Systems and Service Supply Chains

Due to global expansion and the need for close collaboration with business partners, many

companies have grown in the direction of enterprise systems extension by including service
operations. Most of the manufacturing enterprises have historically focused mostly on the
supply chain management of designing and manufacturing physical products while paying little
attention to the so-called forgotten supply chain of their services and post-sales businesses.
Post-sales businesses represent all the maintenance, repair, and overhaul (MRO) services that are
either not included in the original equipment sales or not delivered by the original equipment
manufacturers (OEMs). For the post-sales service intensive enterprises (e.g., Boeing and Otis),
the profit margin of their MRO businesses is usually much greater than that of original goods or
equipment sales. With combined higher net margins and decreased capital requirements of the
post-sales service operations, greater financial value can be significantly created.
Complexity is inherent in most real-world service enterprise systems which are usually
characterized as a super-hybrid system. Service enterprise system modeling itself is a complex
task not only from the effort involved in mapping out all the information paths and business
processes in the service supply chain and the simulation models but also due to the complex
taxonomy of object types involved in the enterprise system. A generic learning tool for designing
and modeling an enterprise-level super-hybrid environment requires substantial innovative
learning mechanisms.
Service quality is typically a significant competitive factor for those service-intensive
industries that provide planning, monitoring, maintenance, and repairing services for their aftersale equipment (e.g., elevators). The ability to plan, schedule, and manage the service activities is
crucial to the service-based companies. Nevertheless, in modern service industries, there are no
consistent methods for service-related tasks, such as workforce planning, scheduling, and
resource allocation. For global operations, most service-intensive organizations are still reliant

on a great number of different business processes and sub-optimized approaches to support each
individual regional operation. Even though numerous analytical techniques have been developed
for the scheduling of various manufacturing systems, only relatively few studies were targeted at
the service sector. Among them, Ahituv and Berman (1988) have developed techniques that can
be used in the management of various service networks including ambulance, police, fire, and
courier services; Kolesar and Blum (1973), Smith (1979), Hambleton (1982), Agnihothri and
Karmarkar (1992), Hill, March, Nachtsheim, and Shanker (1992) have studied the field service
territory planning problems that involve balancing the number of technicians and the size of the
geographic region they will service in order to achieve some performance objectives; Dzubow
(1972), Panson (1983), Agnihothri and Karmarkar (1992), Hill (1992) have considered various
dispatching rules for the Traveling Technician Problem (TTP); Haugen and Hill (1999) have
proposed three scheduling procedures to maximize field service quality in the TTP and the
comparison of these scheduling procedures against three dispatching rules in a simulated TTP
scenario has shown domination of all scheduling procedures in all four service quality criteria.
Most of these studies were too restrictive in their assumptions such as all service calls were of
the same service class and had the same repair time distribution (i.e., ignoring the factors of
various technician skill levels, parts/tools availability, planned regular maintenance vs.
emergency repair, etc), constant travel speed (i.e., ignoring the factor of various traffic
congestion levels at different times and locations), and do not account for the complexity of the
real-life field service scheduling problem. Also, there are quite a few field service management
software packages available in the market (Albright, 2002); however, their planning and
scheduling algorithms are proprietary and undisclosed.

3. Service Enterprise Systems Education

The trend of service enterprise systems evolution has urged many multinationals to view and
manage the entire operations from a whole new perspective. Specifically, this trend has
prompted companies to start focusing on dynamic, team-oriented organizational structure. As
more companies strive to coordinate activities seamlessly, it is imperative that their employees
be equipped with cross-functional knowledge and skills. Given that students often acquire
knowledge and skills in different functional areas, many attribute deficiencies mentioned
previously to the lack of systematic, cross-functional integration in the curricula. In other words,
academic disciplines including information systems, POM, and other curricula still follow the
stovepipe approach to educating their students (Albrecth and Sacks, 2000; Corbitt and
Mensching, 2000; Gorgone et al., 2002).
The leveling of organizational structure and the resultant changes in the workplace call
for an interdisciplinary curriculum. A review of the current service enterprise systems education
programs shows a lack of collaboration across the boundaries of academic disciplines. In
addition, research has shown that the cross-functional approach to enterprise systems design is
rarely the foci in the curricula (Trauth, 1993; Denis et al., 1995; Bandow, 2005). Such
educational settings are not conducive to developing interdisciplinary knowledge and skills in a
horizontal working environment. Consequently, many recent graduates were criticized for not
being productive team players in a cross-functional team setting due to their lacking of extended
enterprise perspectives and interdisciplinary problem-solving skills.

4. The Framework of ISES Lab

The proposed Integrated Service Enterprise Systems Laboratory (ISES Lab) pinpoints several

important trends that could profoundly shape and revolutionize the modern service enterprise
systems education, including enterprise systems evolution, lean manufacturing, and horizontal
organizations. Associated with each trend, major themes and focuses for advanced service
enterprise systems education are identified and highlighted in this paper. The research projects
and instructional lab assignments are unique in that it combines several service enterprise
systems topics with proven pedagogical methods for conducting research projects and
instructional assignments in service supply chain management. One of the foremost themes of
the ISES Lab is to underline the importance of an extended enterprise system (Davis and
Spekman, 2003) to go beyond its organizational boundary by including its service supply chain
partners in collaborative planning and execution of its aftermarket business operations. With the
notion of extended enterprise, the proposed laboratory environment emphasizes the importance
of seamless integration and multi-directional service supply chain coordination. Second, the lab
assignments fosters critical knowledge and practical applications of lean thinking (Womack
and Jones, 2003) in enterprise systems design to create a lean enterprise (Henderson et al., 1999;
Kennedy, 2003). Based on a holistic, value-stream approach, a lean enterprise is the application
of lean principles and techniques to an extended service enterprise and supply chains. Moreover,
another key tenet of conducting lab research projects and assignments in the laboratory is
interdisciplinary that underscores the significance of intra-organizational collaboration and
integration among business units to ensure a successful extended service enterprise system
implementation. The laboratory environment, along with the practical set of lab assignments,
provides a robust interdisciplinary framework for integrating service enterprise systems
education for students from the disciplines of information systems (IS) and production and
operations management (POM). Finally, the proposed laboratory incorporates several

experiential learning and instructional methods, such as web-enabled collaborative learning,

scenario-based simulation and discovery learning, and student-driven evaluation.
Several courses and project assignments are designed to offer the students practical
application opportunities on lean service enterprise systems improvement through establishing
baselines and target metrics for key business processes. In the wake of changing organizational
structure, the lab environment is created to help students develop cross-discipline knowledge and
skills needed in horizontal organizational structures and develop an integrated service enterprise
perspective by immersing them in a learning environment that closely simulates real-world
business scenarios.

4.1

Web-enabled, simulation-based, collaborative learning laboratory environment

To support the implementation of the ISES Lab, a web-enabled, simulation-based, collaborative

computing environment is set up as the foundation for both the instructional modules and the
laboratory projects. In a snapshot, this technology-enabled learning laboratory serves multiple
purposes:

The laboratory forms the basis of an ideal collaborative learning environment where students
can learn from hands-on experience via various assignments in real-life business contexts.

The ISES Lab provides a variety of software tools in the areas of computer simulation and
modeling (e.g., ProModel and ILOG), business applications development tools (e.g.,
Microsoft Visio Studio), database management systems (e.g., Microsoft SQL Server), and
knowledge discovery and data mining (e.g., Oracle Express and SAS Enterprise Miner) to
support the entire service enterprise systems development process. Specifically, ProModel is
recommended for developing the simulation models, while ILOG CPLEX should be installed

to develop C and C++ programs for linear programming, mixed integer programming, other
mathematical programming problems. In addition, ILOG Solver can be used to solve
problems in production planning, resource allocation, optimization, and management.

To simulate information sharing and transaction exchanges with business partners in a supply
chain, an ERP system (e.g., Microsoft Dynamics) is provided to support such learning tasks
as systems analysis, process mapping, system configuration, and testing.

Next, as an important tool in the simulated environment of intra and inter-organizational

collaboration and communication, an service enterprise portal is incorporated into the
laboratory to demonstrate how a web portal can facilitate more effective group decisionmaking, information sharing, and collaborative planning and design among different team
members.

The ISES Lab includes a collaboration mechanism, shared reference space, for collaborative
learning. This multimedia-enriched cognitive support tool allows students to visually
conceptualize, analyze and communicate their analyses of complex service enterprise
systems problems, and apply lean principles in different settings of information exchange.
The shared reference space support both synchronous and asynchronous communications.
When students are present at the same time over the service network, the collaborative
learning support should assisting students in brainstorming ideas and exchanging information
to co-develop enterprise system solutions. This collaborative learning continues when they
are not working in the same workspace or time, since all the ideas, comments, findings, and
changes to the solution are tracked and recorded in the shared reference space. Collaborative
learning offers a viable, effective approach to deal with the dynamic, demand-responsive
nature of service enterprises.

The ISES lab also offers handicapped accessible laboratory facilities and other necessary
computing equipment (e.g., electronic smart board) for web-enabled collaborative teaching and
learning. A small-scale enterprise database is used as the underlying data source for the project.
Using a web-based information sharing mechanism and an integrated enterprise database,
students can perform the tasks mentioned above by extracting and aggregating information and
knowledge from different functional areas in an enterprises value chain, such as engineering
design, manufacturing, logistics, and services.

4.2 Laboratory projects and assignments

Through completing laboratory projects and assignments, students are imbued with important
concepts in analyzing and improving a service enterprise and its supply chain, such as business
workflow and production processes, balancing demand and supply (capacity), global supply
chain optimization and integration, infrastructure of information systems and computer networks,
interaction and information sharing among internal and external environment (i.e., upstream
suppliers, downstream dealers, retailers, and customers, as well as the third-party inbound and
outbound logistics providers), and implementation and deployment strategies.
The lab also provides a viable environment for developing fundamental theories to
improve service supply chain network communications and collaborative efficiency.
Specifically, the lab projects and assignments were designed to test several hypotheses of
complex behaviors in service-oriented supply chain operations. For instance, three tested
hypothesis are shown as follows:
Hypothesis # 1 The size and complexity of a service-oriented supply chain can evolve
dramatically with characteristic time-constants, such weeks and months. The dynamic,

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demand-responsive nature of many services makes the modeling and decision making
under uncertainty significantly more critical than in manufacturing settings.
Hypothesis #2 Transactions and interactions in a supply chain network may track up to
thousands of supply chain units and each unit may further contain hundreds of
maintenance actions. Each maintenance action can represent a unique supply chain unit
including spare parts, repair processes, technical skills, logistics and distribution, etc.
Hypothesis #3 The object types in a supply chain may constitute a complex taxonomy
ranging from material properties, inventories, technical skills, to transportation dynamics.

It has been realized that substantial service improvements in quality as a result of

implementing visually rich simulation systems. The proposed laboratory environment applies
this idea to testing the hypotheses mentioned above via laboratory simulation and
experimentation. Laboratory simulation and experimentation involves the creation of an artificial
environment for isolating and better controlling of potentially confounding variables (Hersen &
Barlow 1976, Jarvenpaa et al. 1984, 1985, Jarvenpaa 1988, Benbasat 1990a, 1990b, DeSanctis
1990). A simulation-driven decision support laboratory will be developed to examine the
explosion in distributed supply chain network and information exchange activities. A set of
simulation models are developed and tested on a hypothetic or real-world demonstration problem
against an established baseline and the three hypotheses mentioned above. In addition, scenariobuilding is adopted to gather new insights into relationships among transactional variables in a
service supply chain network.

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4.3

Implementation principles and learning methods

The following paragraphs depict how the lab project is carried out through the application of
three fundamental implementation principles: (1) collaborative and just-in-time learning via
multidisciplinary product team formation and role-playing and (2) scenario-based simulations
and discovery learning.
Collaborative learning has long been promoted by numerous educators and researchers
(Johnson and Johnson, 1989; Kuhn, 1993). The ISES Lab supports collaborative learning by
creating a simulated, shared environment in which students can collectively investigate realworld business problems in case studies of model companies and recommend viable enterprise
systems solutions. Moreover, to promote just-in-time learning, both the IS and OM teams are
encouraged to continually develop their competencies by learning new knowledge and skills
from their own disciplines as well as from other disciplines in an iterative cycle of learning and
application.
To assist students in successfully carrying out the laboratory projects, the blended
learning approach is adopted by combining instructor-led lectures with scenario-based
simulation learning and discovery learning methods (Bruner, 1961, 1966; Leutner, 1993;
Hammer, 1997; Johnson et al., 2003). The scenario-based simulation learning method is
recommended because computer simulation research has shown the effectiveness of computer
simulation as a strategic planning tool for organizations to implement lean principles (Fripp,
1993; Towne, 1995; Aldrich, 2003). With scenario-based simulation, students learn to analyze
and simulate different production scenarios, think hypothetically, and evaluate different potential
solutions before making the final decisions.
Systematic validation and statistical analysis of simulation results is an essential step of a

12

successful simulation modeling and development. To ensure the validity of the developed
simulation model, a validating process will be performed to examine if the model correctly
represents the essential aspects of the system within the real-life context. To begin with, a
number of validation criteria will be defined to facilitate fully understanding of a successful
simulation. The modeling assumptions and sensitivity will be examined by testing and changing
various parameters identified in the model. Statistical tests (e.g., goodness-of-fit tests) will be
performed on all inputs and internal processes. The model will be assessed to verify whether the
simulation model is built with respect to requirements and performance criteria established
during the requirements definition stage and further examine if it is a viable representation of the
real-life service system. Furthermore, an empiricists approach (Law, 1991) will be adopted for
supply chain model validity checking on the initial set of modules and a rationalists approach
for the newly defined model components. With the empiricists approach, the performance
results generated by the scenario simulation model are then compared with historical data in the
real-life environment. Hypothesis tests are used to determine if the disparity between the various
performance results is statistically significant between the real model structure. For the new
model development, historical data is unattainable. The newly developed model is then closely
examined and the assumptions are properly updated and justified.
To fully seize the essence of the behavior of the system, experimentations will be
indispensable. Formulating pertinent experimental conditions and simulation scenarios under
which the model behavior is examined. Given that statistical analysis of the results of each
experiment is appropriately conducted and the results are properly evaluated and compared, the
experimentation process will not only lead to a greater comprehension of the behavior of existing
system but also figure out the ways to enhance the system with desirable performances.

13

As shown in Figure 1, students are required to role-play as employees in two

organizational units at any typical organization as they were in the real world setting:
Department of Information Systems (IS) and Department of Production and Operations
Management (POM). In addition, students take turns playing the role of the end customers
who work with the product teams to provide insight from the customers perspectives. By
playing different roles and working with students from different disciplines, both the IS and
POM teams can acquire cross-functional knowledge and skills. Essentially, the laboratory project
requires the students to carry out multidisciplinary, collaborative tasks in the following areas:

Information processing support activities: The IS teams carry out information processing and
related support activities. They are responsible for developing right-sized information
systems to provide just-in-time ERP data and information

Primary production activities: The POM teams focus on the primary activities directly
related to services and after-sale operations. In addition, they are in charge of organizing all
the value-creating activities in the best sequence for a specific service along a value stream.

Continuous process improvement: While each team has its primary focus, both the POM and
IS teams will collectively define and continually refine the business and manufacturing
processes throughout the entire project.

5. A Generic Example of Service Enterprise Systems Simulation

To assist in conceiving both the theoretical and practical significance of the lab projects, a
generic examplefield service planning and scheduling of after-sale equipmentis
illustrated in this section. From a broader perspective, the primary sources of field service
work include planned maintenance tasks, callbacks, repair work and open-order requests.

14

Among them, planned maintenance and scheduled repairs are performed at regular intervals
on the serviced units through service contracts. Callbacks or emergency service calls are
unplanned service requests that are due to equipment failure and that arise randomly over
time. These work types have very different scheduling requirements. One of the integral
simulation models is to combine all the work types in one optimized scheduling solution to
address some highly dynamic and challenging problems. In the simulation process, various
real-life scenarios are to be set up and constraints on service work are to be defined,
including different work types, spatially separated service geography, skills, parts, and other
business rules.

Primary Production Activities

(role-played by the POM Team)

Inbound
Logistics

Outbound
Logistics

Operations

Product
Team X

Material Flows

Information Flows

Suppliers

The
Customer
Group

Product
Team Z

Information Processing Support Activities

(role-played by the IS Team)
Databases
Design

Programs
Design

Interfaces
Design

Product
Team Y

Networks
Design

Figure 1. Role-Playing and Interdisciplinary Learning for Collaborative Planning and Design

15

To address the realism of the defined service demand assumptions and requirements, a
field service planning and scheduling process for automated and real-time resource allocation
and scheduling is to be simulated. This simulation task will be conducted based on a multidimension assignment of service jobs, required resources, and time slots. For initial schedule
planning, an external Enterprise Resource Planning (ERP) system is connected for the provision
of basic data, such as equipment history and usage data, types of service work, parts availability,
etc. The planning module of the system is capable of developing an optimal plan by grouping the
service jobs based on both the distance-proximity clustering and time-proximity clustering
methods. For essential mapping information, an external Geographic Information System (GIS)
will be integrated to provide a map database containing layout of roads, geocode information,
direction and speed limits of roads, etc. As the heart of the simulation model, an automated and
integrated scheduling engine will be built to continuously run for maintaining a real-time
optimal or near-optimal solution across a rolling horizon as uncertain conditions, such as
service times, travel times and arrival of callbacks, are realized. The scheduling engine is
capable of integrating all service work types and the solution will faithfully abide by all the
objectives (soft business rules) and constraints (hard business rules). Figure 2 depicts a
conceptual architecture of the simulation environment mentioned above.
The modules of the lab will be a simulation-based testing environment with two essential
components: Visual Modeler and Simulator and Service Operations Optimizer.

Visual Modeler and Simulator. This component will be employed to create necessary
simulation models to simulate various interactive and collaborative transaction and
exchange scenarios in specific service supply chain implementations. This simulation
environment setting will help design and valuate high performance service operations.

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Enterprise Resource Planning (ERP)

Equipment
History

Usage
Data

...

Types of Parts
Work
Data

Field Service
Geographic
Information
System

Business
Objectives
& Constraints

Planner

(GIS)
Field Service
Scheduler

Figure 2. Conceptual Architecture of the Field Service Simulation Environment

Service Operations Optimizer. This mechanism is to assist in optimizing complex

stochastic problems in the systems via optimization modeling.

The simulation-based laboratory will help contribute to develop service-oriented supply

chain and optimization theories for the service industries. Meanwhile, the results will provide
guidelines to academic and business communities in the design of advanced supply chain
software for service sector. In addition, the research effort will advance new capabilities in
modeling, simulation, and optimization of service supply chain.

6. Conclusions
The ISES Lab facilitates implementing a service enterprise systems educational plan in two
aspects: (1) developing the after-sale service logistics and information management courses and
17

(2) implementing a new approach to enhancing the learning of modern service supply chain
optimization and service enterprise systems integration. When it comes to broader impacts, the
ISES Lab could help promote research that extends the application of optimization theories,
simulation and modeling techniques, and information technologies to an important economic
sector, the after-sale service sector. For instance, one of the research initiatives is the
development of fundamental theories of condition-based maintenance (CBM) and field service
management for improving the competitiveness and reliability of after-sale service enterprises.
Additionally, this research will open a new area for teaching service planning and scheduling,
service chain optimization, and e-service information systems design. It will provide the
foundation for introducing after-sale service logistics optimization in the supply chain
management course, which is becoming an important course in the curricula of many disciplines,
such as industrial engineering, production and operations management, operations research, and
management information systems.
This research work can be incorporated into the teaching of both operations management
and information systems at both the undergraduate and graduate levels. The educational plan
potentially leads to significant enhancement in the learning of service supply chain and logistics
management. The introduced courses will improve both theoretical and practical aspects of the
service enterprise systems curriculum. Involving students in research not only trains them
adequate problem-solving skills but also encourages them to continue graduate study. The
proposed ISES Lab also supports educational enhancement for cross-disciplinary programs by
incorporating various innovative learning methods for effectively engaging students in service
enterprise systems design and management. The philosophy to innovative technology
development consists of applying results from various sources. The proposed lab environment

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facilitates collaboration among multidisciplinary members (majoring in IS, POM, etc.) allowing
the project teams to leverage their diverse experiences, knowledge, and skill sets. With the
special designed lab projects and assignments, teaching and learning are significantly enhanced
through the use of the scenario-based simulation exercises and discovery learning method. The
ISES Lab provides an interdisciplinary and collaborative learning environment allowing students
to greatly advance their cross-functional knowledge, problem-solving skills, and innovative
thinking in lean enterprise systems designwhich will well prepare them prior to their entering
the job marketplace.

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