Simulation-based planning and optimization in multi-echelon supply chains

Abstract

In this paper we present a methodology and simulation environment for solving multi-echelon supply chain planning and optimization problems for industries with batch and semi-batch processes. The introduced methodology is aimed to analyze efficiency of a specific planning policy over the product life cycle within the entire supply chain for automated switching from a non-cyclic to cyclic and to optimize the cyclic planning policy for products at the maturity phase. For optimization of a multi-echelon cyclic schedule, the simulation optimization algorithm developed is based on integration of the multi-objective genetic algorithm (GA) and response surface-based local search to improve GA solutions. The comparative analysis of planning policies is based on estimation of the difference between mean values of their total costs by using the Paired-t confidence interval method and evaluation of an additional cost of the cyclic schedule. The simulation environment allows one to describe input data to build the supply chain network and store it in an external file, computing effective planning policies, automatically generating and running a network simulation model, generating production rules for switching from one planning policy to another and optimizing parameters of a multi-echelon cyclic schedule. Finally, a business case is described that illustrates the practical application of the presented methodology.