A distributed simulation model for inventory management in a supply chain

Abstract

One of the challenging issues faced by each enterprise of a supply chain is to determine the right production and/or stock levels in order to minimize costs while ensuring a given customer service. In a supply chain, each enterprise pursues its own goal and takes its own decisions in an independent way. However, the decisions are usually influenced by the actions or decisions of the others. One of the main factors influencing the decision process is the customer demand originated at the downstream layer of the supply chain and traveling up the supply chain in terms of orders placed on to upstream layers and becoming more and more altered. In order to achieve high efficiency in the whole system, an effective coordination between enterprises is needed. In this paper, an analysis of how supply chain actors interact with each other and how the communication and coordination improve the efficiency of the supply chain is presented; we propose a distributed simulation model for analyzing the effect of inventory policies and information sharing on changing customer demands. The proposed model is tested on an Italian extended enterprise in which the actors cooperate to produce compressors for refrigerators. © 2004 by Springer Science+Business Media New York.