Dynamic Simulation of a Supply Chain with and without Flexibility in the Lead Time Agreements

Abstract

While supply chain efficiency has remained a vital field of research during several decades, the development of improvement schemes has accelerated greatly. However, schemes like Vendor Managed Inventory are not easily implemented in a supply chain because of the great responsibility the scheme will give to the producer in the supply chain. Other, simpler schemes to improve supply chain efficiency may include Flexible Lead Times (FLT), a concept presented in Björk and Carlsson (2006). The total effect of the improvement scheme needs to be shown in a comprehensive way to establish the concept’s advantage. This will be done through a simulation study of tissue supply chain, including a producer and several distributors. The simulation model takes dynamically the orders, the production schedule and the delivery decisions into account simultaneously. Numerical optimization is therefore needed in each simulation step to model the decisions for the producer and the distributors. While the distributor decision model is a simple one and solvable analytically, the producer is faced with a combined production distribution problem that is solved successfully with a genetic algorithm and the solution from the tissue supply chain example will give us insight in the possible savings a FLT concept may provide.