A system dynamics modeling approach for a multi-level, multi-product, multi-region supply chain under demand uncertainty

Abstract

It is highly crucial to design a supply chain in a way that determines to what extent each level should direct orders to the next level and, in cases where several next levels exist, which next level should be selected for such transmission of orders. The main significance of the proposed model is to choose an appropriate region for order placement and also investigate when a level in a specific region is disrupted what happens to the other levels in other regions. Also the main impact of this article is pertaining to managerial decisions that if a level in supply chain is shut down and disrupted what they should do Therefore, in the present study, system dynamics approach is used to design a five-level supply chain consisting of retailer, final product distributor, manufacturer, material distributor, and supplier in four different regions by specifying the amount of orders placed by each level at each region as well as the next level at each region that should receive these orders. The developed model is kind of multi-product model in which initial customer demand for any product is a random variable. There is only one entity in each region at every level, except for the number of material distributor(s) and supplier(s) which equals the number of raw material item(s). Finally, a numerical example is presented to discuss the result for normal conditions, oscillating demands, variations in price, changes in costs, and a combination of these variations which may vary depending on changes in the how orders are placed.