Positioning of Inventory in Supply Chain Using Simulation Modeling

Abstract

Inventory costs are the major costs in production costs, so in order to gain global competitive advantage and to obtain a stable position in the market for one’s product, one needs to reduce the inventory in the entire supply chain rather than optimizing at a single location. This study focuses on reducing the inventory in a three-stage model with two echelon supply chain considering two identical retailers with one distribution center and one manufacturer. The study considered continuous review time in the inventory replenishment policies and also took single product into consideration. Arena is one of the most sophisticated simulation software available. In this model, simulation is performed using arena simulation for optimizing the inventory. Moreover it identifies the reorder point and reorder quantity in order to optimize the inventory at both the echelons in the supply chain