Supply Chain Management Based on Modeling & Simulation: State of the Art and Application Examples in Inventory and Warehouse Management

Abstract

The business globalization has transformed the modern companies from independent entities to extended enterprises that strongly cooperate with all supply chain actors. Nowadays supply chains involve multiple actors, multiple flows of items, information and finances. Each supply chain node has its own customers, suppliers and inventory management strategies, demand arrival process and demand forecast methods, items mixture and dedicated internal resources. In this context, each supply chain manager aims to reach the key objective of an efficient supply chain: ‘the right quantity at the right time and in the right place’. To this end, each supply chain node (suppliers, manufacturers, distribution centers, warehouses, stores, etc.) carries out various processes and activities for guarantying goods and services to final customers. The competitiveness of each supply chain actor depends by its capability to activate and manage change processes, in correspondence of optimistic and pessimistic scenarios, to quickly capitalize the chances given by market. Such capability is a critical issue for improving the performance of the ‘extended enterprise’ and it must take into account the complex interactions among the various supply chain nodes. The evaluation of correct trades-offs between conflicting factors, such as inventory reduction and fill rates, customers’ satisfaction and transportation cost, sales loss and inventory costs, resources management and internal costs, are (among others) the most important tasks of a competent supply chain manager. Therefore, supply chains have to be regarded as complex systems; a wide range of factors usually affects the behaviour of complex systems. The ways in which such factors interact and the stochastic nature of their evolution over the time increase the complexity of many real-world supply chains up to critical levels, where the use of ad-hoc methodologies, techniques, applications and tools is the only way to tackle problems and succeed in identifying proper and optimal solutions (Castilla and Longo, 2010).