Impact of Ordering Decisions on Performance of a Supply Chain – An Experimental and Simulation Study

Abstract

A supply chain consists of a network of organizations. Each organization in it acts as either customer or supplier to others. Ordering and replenishment decisions of each organization or stage contribute to supply chain performance. A simulation study and experimentation were conducted in this study to determine the impact of ordering decisions on supply chain performance. The ordering decisions at each stage are taken by intuition for experimentation and are taken by inventory policies for simulation. Under customer demand distribution information sharing, the performance of a supply chain is evaluated and compared between those two conditions. A supply chain role play game software package is used to evaluate supply chain performance by intuition, and simulation is used to evaluate different inventory policies. Fixed order policy, Order Up-to Level (OUL), Modified OUL (MOUL), (r, Q) and (r, S) inventory policies are considered in this study. The performance measures used are the total supply chain inventory per period, bullwhip effect and supply chain fill rate. Grey Relational Analysis (GRA) is used to identify the best method to take decisions in supply chain. Results show that supply chain performance is best under MOUL policy. Based on the results of this study, supply chain members are encouraged to identify the best inventory policy and use that rather than making decisions based on intuition.