Supply Chain Inventory Optimization With Multiple Types of Customers and Equal Priorities: A Study Using Heuristic and Simulation Methods

Abstract

In this study, the optimal inventory policies for a supply chain with multiple types of customers is investigated to minimize the total inventory cost. Each customer type has specific demand patterns in terms of ordering frequency and order quantity; moreover, there is no difference in priority among the customers. Due to the computational complexity of this optimization problem, we develop a reduced form of the original problem and propose a heuristic that is easily implementable by practitioners. In addition, a simulation model is developed on the same problem setting as a benchmark. To illustrate the implementation and the effectiveness of the proposed heuristic, a numerical example is studied, followed by a sensitivity analysis of the key parameters. The numerical results show that our heuristic provides a comparable performance as simulation-based optimization (a 2.6% difference), and the sensitivity analysis shows a reliable robustness of the model (less than 5.2% difference).