LSP-Constrained Supply Chains: A Discrete Event Simulation Model

Abstract

In this paper, we present a logistics service provider (LSP) constrained supply chain problem, particularly; we propose a novel supply chain model that consists of three layers of non-cooperative manufacturers, distribution centers and retailers. Products flow from the manufacturers across different warehouses to retailers via LSP. Inventories at warehouses follow smooth and continuous replenishment policy, i.e. , perpetual review. The supply chain is represented as an optimization model that maximizes the revenue of manufacturers meets the retailers’ demand and at the same time identifies the necessary warehouses, particularly for supply chains that are affected by leadtime (LT) variation such as fast response industry and short life products. The model solution is adaptive; it determines the best manufacturing rates and identifies the logistic bottlenecks in dynamic supply chain networks. Numerical solutions along with simulation experiments of different supply chain topologies are presented. The simulation results demonstrate the model capability to maximize the revenues by tuning the manufacturing rates and monitoring the workinprocess, products in transit as well as products in inventories