Simulation of an integrated age replacement and spare provisioning policy using SLAM

This paper presents a SLAM simulation model for determining a jointly optimal age replacement and spare part provisioning policy. The policy, referred to as a stocking policy, is formulated by combining age replacement policy with a continuous review (s, S) type inventory policy, where s is the stock reorder level and S is the maximum stock level. The optimal values of the decision variables are obtained by minimizing the total cost of replacement and inventory. The simulation procedure outlined in the paper can be used to model any operating situation having either a single item or a number of identical items. Results from a number of case problems specifically constructed by 5-factor second order rotatory design have been presented and the effects of different cost elements, item failure characteristics and lead time characteristics have been highlighted. For all case problems, optimal (s, S) policies to support the Barlow-Proschan age policy have also been determined. Simulation results clearly indicate the separate optimizations of replacement and spare provisioning policies do not ensure global optimality when total system cost has to be minimized.     

Optimal inventory control of lumpy demand items using (s,S) policies with a maximum issue quantity restriction and opportunistic replenishments

This paper presents a modified (s, S) inventory model which describes the characteristics of an inventory system with lumpy demand items. A maximum issue quantity restriction of w units and a critical inventory position of A units are incorporated into the inventory control policy. Customer orders with demand sizes larger than the maximum issue quantity will be filtered out from the inventory system and satisfied by using special replenishment orders in order to avoid disruption to the inventory system. The option of opportunistic replenishments is introduced to further minimize the total replenishment cost. An opportunistic replenishment is initiated if the level of the current inventory position is equal to or below the critical level when a customer demand with a size exceeding the maximum issue quantity arrives, which does not only initiate a direct shipment to the customer, but also raises the inventory position to S. Two effective algorithms are developed to determine the optimal values of w, A, s and S simultaneously. The first algorithm is based on the branch-and-bound tree search technique, and the second one is based on the concept of genetic algorithms. Numerical examples are used to illustrate the effectiveness of the algorithms developed. The effects of changes in the cost and system parameters on the optimal inventory control policy are also studied by using sensitivity analysis.     

Optimization and optimality of a joint pricing and inventory control policy in periodic-review systems with lost sales

This paper studies a periodic review dynamic pricing and inventory control problem with fixed ordering cost included. Demand is uncertain and price-sensitive in a general form. At the end of each period, all unmet demand is lost. We focus on the optimization and optimality of an (s, S, p)-type policy, which operates as follows: whenever the inventory level is less than or equal to s, an order is placed to order-up-to level S; when the inventory level is larger than s, no order is issued; the price p is specified by the inventory level. We further numerically investigate the optimal solutions and their sensitivity to cost parameters and demand uncertainty.     

On the Bullwhip Avoidance Phase: supply chain collaboration and order smoothing

This paper provides an assessment of the impact of collaboration and smoothing replenishment rules on supply chain operational performance and customer service level. Three supply chain configurations (i.e. Traditional, Information Exchange and Synchronised) in which orders are generated by smoothing (S, R) inventory control policies are studied for different proportional controllers. A supply chain stress test is performed through a sudden and intense change in demand. A structured and extended supply chain assessment framework is adopted. The main conclusions of this paper are the following. (i) The impact of Supply Chain Collaboration on overall supply chain performance is greater than that of order smoothing. Order smoothing mitigates the bullwhip effect, but it may have a negative impact on customer service. Supply Chain Collaboration mitigates the bullwhip effect, provides inventory stability, limits lumpy orders and enhances customer service level. (ii) The negative effect on customer service level of order smoothing is almost eliminated in synchronised supply chains.     

Approximation of the probability distribution of the customer waiting time under an (r,s, q) inventory policy in discrete time

We study a single-item periodic review (r, s, q) inventory policy. Customer demands arrive on a discrete (e.g. daily) time axis. The replenishment lead times are discrete random variables. This is the time model underlying the majority of the Advanced Planning Software systems used for supply chain management in industrial practice. We present an approximation of the probability distribution of the customer waiting time, which is a customer-oriented performance criterion that captures supplier–customer relationships of adjacent nodes in supply chains. The quality of the approximation is demonstrated with the help of a simulation experiment.     

Joint hybrid repair and remanufacturing systems and supply control

The control of a stochastic manufacturing system that executes capital asset repairs and remanufacturing in an integrated system is examined. The remanufacturing resources respond to planned returns of worn-out equipment at the end of their expected life and unplanned returns triggered by major equipment failures. Remanufacturing operations for planned demand can be executed at different rates and costs corresponding to different replacement and repair modes. The replacement components inventory is provided by an upstream supply with random lead times. The objective is to determine a control policy for both the supply and remanufacturing activities that minimises the average repair/replacement, acquisition and inventory/shortage total cost over an infinite horizon. We propose a suboptimal joint remanufacturing and supply control policy, composed of a multi-hedging point policy (MHPP) for the remanufacturing stage and an (s, Q) policy for the replacement parts supply. The MHPP is based on two inventory thresholds that trigger the use of predefined remanufacturing modes. Control policy parameters are obtained combining analytical modelling, simulation experiments and response surface methodology. The effects of the distribution, mean and variability of the lead time are tested and a sensitivity analysis of cost parameters is conducted to validate the proposed control policy. We also show that our policy leads to a significant cost reduction as compared to a combination of a hedging point policy (HPP) and an (s, Q) policy.     

The trans-shipment problem in a two-echelon,multi-location inventory system with lost sales

In this paper, we address a two-echelon, multi-location pooling inventory system that consists of an outside supplier, a warehouse and two retailers. To control their inventories, both warehouse and retailers use (R,?s,?S) policy. The retailers face stochastic customer demands for a single product and the warehouse receives only the replenishment orders of retailers. In case of stock-out at retailers, emergency trans-shipments are used to satisfy the unmet demand at one retailer with the surplus from the other retailer. When the stock is insufficient at the warehouse, we propose two rationing policies to allocate on-hand stock between retailers. The demand that cannot be satisfied neither by stock on-hand nor by trans-shipment from retailers is considered lost. Our work has two objectives. First, we propose an inventory model based on three components: the optimisation inventory model, the trans-shipment policy and the rationing policies for determining the best values of (s,?S) at each location that minimise total system cost. Second, we validate this model via an empirical simulation study that allows us to identify the influential parameters on trans-shipment benefits.     

Inventory management in a lateral collaborative manufacturing supply chain: a simulation study

Due to global competition, firms are seeking more effective supply chain (SC) collaboration in order to provide quality products with less cost, at the right time and in the right quantity. The present study examines manufacturing SC collaboration on the basis of holding cost, backorder cost and ordering cost. The types of collaboration examined are vertical, horizontal and lateral collaboration. This research emphasises lateral collaboration by determining the impact of inventory policies ((s, S) and (s, Q) inventory policies) on SC performance. For better understanding, a conceptual model is provided that is supported by a numerical example. As the study of SCs is complex in nature, a simulation approach has been employed to show the impact of lateral collaboration on performance measures such as the total cost, which is the sum of several cost components: inventory holding cost, backorder cost and ordering cost. The research is based on two manufacturing SCs where the manufacturer is taken as the collaborative node. To allow more clarity, a separate study on each cost component has been conducted. The laterally collaborative SC was simulated on ARENA 9.0, a simulation package. The results show that the efficacy of lateral collaboration outperforms horizontal collaboration due to having the individual SC members at more liberty to make decisions.     

A new algorithm for computing optimal (s, S) policies in a stochastic single item/location inventory system

It has been shown that a class of (s, S) policies is optimal to the single item/location inventory system. However, the computational complexity of finding the optimal (s, S) policy has restricted applications of this inventory system. This paper proposes a new algorithm to search for the optimal pair of s and S. We introduce a dummy cost factor and an auxiliary function into our algorithm. The algorithm searches for the optimal dummy cost through continuously evaluating the auxiliary function. It differs from the approach of Zheng and Federgruen (1991) in several aspects and has certain advantages. First, as it revises the dummy cost based on the sign of the auxiliary function, the primary goal of the search is not to compute the optimal s and S during each iteration. Second, by identifying the non-prospective sets of S, the algorithm further reduces the search effort. Numerical tests show that on the average, the proposed algorithm saves more than 30% of evaluation effort compared with Zheng and Federgruen's method.     

Optimal reordering policies for the AHM inventory model with two supply modes

Summary We characterize the optimal reordering policies for the stationary periodic review AHM inventory model when there is a quick and a — generally cheaper — slow supplier, whose delivery lags differ by one period and whose fixed and unit ordering costs are arbitrary, as generalized (s,S) policies described by four parameters (s ₁,S ₁,s ₂,S ₂). Computational results using Howard's policy iteration algorithm yield four possible types of such policies depending on the model parameters.     

A simulation based approach for supply network control

We focus on the problem of strategic network design in the context of multi-site enterprises. We develop a simulation model for various supply network designs evaluation. The suggested model is generic in the sense that only input data modifications are needed to adapt the model to a given supply network structure, while the model's procedural logic stays unchanged. The model reproduces the dynamics of the totality of the supply chain activities. It takes into account control policies related to the inventory management and to the scheduling of production activities. It also carries out local optimisations by dynamically allocating the customers’ demands to the appropriate distribution site and the replenishment orders expressed by the distribution and production sites of the enterprise so as to minimise a global cost function. Simulation execution permits to compute various performance measures. These indicators inform the decision-maker about the profit of the enterprise and about its customer's service level. In this paper, we propose to detail the simulation model. Then, for a fictitious problem of supply network design based on two real life applications, we highlight the influence of the control policies on the performance of the studied enterprise.     

Additive manufacturing technology in spare parts supply chain: a comparative study

Additive Manufacturing (AM) technology has the potential to significantly improve supply chain dynamics. The purpose of this paper is to investigate the impact of AM on spare parts supply chain. Three supply chain scenarios are investigated in this paper, namely conventional supply chain, centralised AM-based supply chain and distributed AM-based supply chain. Based on system dynamics simulations, this paper specifically compares three supply chain scenarios, in terms of total variable cost and carbon emission. The results show the spare part supply chain utilising AM is indeed superior to the traditional one in sustainable performance. It is also expected that AM can facilitate the spare parts supply chain to achieve more economic benefits along with its development. To our knowledge, this paper is one of the early studies that explores the impact of AM on supply chain performance and quantitatively examines the superiority of utilising AM in spare parts supply chain. Some suggestions are also provided to help managers adopting AM in their spare parts supply chains.     

Vendor-managed inventory and the effect of channel power

We analyze decentralized supply chains that follow general continuous review (Q, R) inventory policies subject to vendor-managed inventory agreements where the supplier chooses the order quantity Q, and the retailer chooses the reorder point R. Within the VMI scenario, we explore the effect of divisions of channel power on supply chain and individual agent performance by examining different game theoretic models. Optimal policies and analytical results, including existence and uniqueness proofs for equilibrium solutions under VMI, are derived. Numerical results are provided to compare the effectiveness of VMI and to analyze different channel power relationships under a variety of environmental conditions. We find that VMI can result in considerable supply chain savings over traditional relationships and that the relative division of channel power can significantly effect the performance of VMI. Interestingly, we find that the greatest system benefits from VMI arise in asymmetric channel power relationships, but that individual agents lack the incentive to assume a leadership role.     

Integrated decision support framework for distribution network design

In the current business environment of competition shifting from company-to-company to supply chain against supply chain, there is an increasing need for logistics providers (LSP) to gain cost effectiveness with no compromise on service levels. One key initiative that LSP can undertake is to allocate and utilise their storage and transportation assets optimally. The current work is an attempt in that direction and provides a hands-on decision support framework that integrates MCDM, network optimisation, and discrete event simulation to address distribution network design and transport optimisation. The use case of PT Pos Indonesia in the metropolitan area of Greater Surabaya highlights the benefits of combining ICT tools with well-established best practices in supply chain management. Findings of this work highlight that the number of distribution facilities for the case at hand should be reduced from nine to four. Compared to the existing, the identified network configuration unlocks potential cost saving in transportation and warehousing of 18%–22%, reduces CO₂ emissions by nearly 30%, with no deterioration in service level. Managerial implications about transportation policies are highlighted in the conclusive part of this paper.     

Performance evaluation for tandem multi-factory supply chains: an approximate solution

Predicting the performance of multistage manufacturing systems is usually viewed as challenging because of unexpected machine breakdowns, random processing times, uncertain inter-factory transportation times, etc. In this paper, the authors formulate an approximate model for the tandem manufacturing systems, where the inventory in each buffer is monitored based on the (s, Q) discipline. This model divides a multistage system into a series of primitive line segments, each of which is characterised by a continuous time discrete state Markov process. The model may be applied in two types of systems: (1) tandem flow lines with batch processing and (2) multi-factory manufacturing supply chain, where inter-factory material transportation is required. Based on the model, a number of commonly used performance measures, including throughput, inventory, transportation frequency, etc., can be estimated. These estimates may enable manufacturers to evaluate the performance of the systems, and hence improve the management of production and inventory.     

Designing a supply chain network for deteriorating inventory under preservation effort and trade credits

When designing a perishable goods supply chain network under trade credit arrangements, distribution companies must contend with deteriorating inventory and product preservation efforts to maximise profits. Key decisions include locating distribution centres (DCs), assigning retail stores to DCs, joint replenishment cycle time and investing in preservation technology. This paper addresses these factors from the position that as preservation effort increases, preservation technology cost increases and deterioration rate decreases. An algorithm based on piecewise nonlinear optimisation is provided for solving supply chain network design problems efficiently. In contrast to other studies that have used the approximation approach, the proposed approach solves the original problem accurately and efficiently. Numerical studies are conducted to demonstrate the solutions procedures and determine the effects of the parameters on decisions and profits. The results of this study and the proposed modelling approach are useful references for managerial decisions in designing a supply chain network the context of trade credit and inventory deterioration.     

Stockout propagation and amplification in supply chain inventory systems

We investigate the existence and magnitude of stockout propagation and stockout amplification in the context of supply chain inventory systems. Stockout amplification is a stage-to-stage increase in overall stockout rates. Stockout propagation is the tendency for stockout at one node to instigate a stockout at a neighbouring node and is conceptually related to the idea of cascading failures in physical systems, such as electrical power grids. We study these concepts in both upstream (‘supply side’) and downstream (‘demand side’) directions in the context of normal operating conditions for an adaptive R, S (periodic, order-up-to) inventory policy. We build a simulation model of a 5-stage serial supply chain that experiences normally distributed customer demands and gamma distributed lead times. We find that stockout propagation exists, but contrary to conventional wisdom, it occurs in the upstream direction. There is little indication that stockout propagation is occurring to any significant degree in the downstream direction. We also find stockout amplification occurring in the upstream direction in scenarios where more aggressively adaptive inventory parameter updating is performed. We discuss implications of this work in the areas of supply chain inventory modelling, ordering decisions, safety stock determination, and the use of adaptive inventory policies.     

竞争型多源供应链网络设计与弹性管理研究

研究了竞争型制造商多源采购供应链网络设计中的弹性管理问题,建立了集弹性制造定价/弹性空库存惩罚/弹性预警/弹性成员选择/弹性拥堵延迟/弹性运输于一体的供应链整体架构。利用供应链背景下的一般运作模型,建立了弹性管理下的竞争型多源网络。考虑各级分销商失效的潜在风险,采用了弹性管理下的多源供应网络。最后考察了多水平期望容忍条件和全球供应链对于目标函数、正向架构的弹性运作和供应商竞争程度的影响。     

Distributed supply chain network modelling and simulation: integration of agent-based distributed simulation and improved SCOR model

Agent-based distributed simulation is an efficient methodology for modelling and analysing such complex adaptive systems as dynamic supply chain networks. However, it lacks an acceptable generic standard. Supply chain operations reference (SCOR) model is a cross-functional framework widely accepted as an industry standard. It provides the standard processes, performance metrics, best practices and associated software functionalities for modelling, evaluating and improving supply chain networks. However, it is a static tool. Integration of agent-based distributed simulation and SCOR model can exploit their advantages to form a generic methodology for modelling and simulation of a wide range of supply chain networks. Therefore, this paper proposes a methodology for distributed supply chain network modelling and simulation by means of integration of agent-based distributed simulation and an improved SCOR model. The methodology contains two components: a hierarchical framework for modelling supply chain network based on the improved SCOR model and agent building blocks integrating the standard processes from the SCOR model. The hierarchical framework provides an approach for structure modelling in any level with different granularities based on the improved SCOR model, and allows rapidly mapping a supply chain network into the structure model of a multi-agent system; while agent building blocks are quite useful and convenient to fill the structure model to fulfil its function modelling. With the approach of structure modelling and function filling, not only can the process of agent-based supply chain network modelling be accelerated, but also the built models can be reused and expanded. Because the hierarchical framework is based on the conceptual framework of SCOR model and agent building blocks integrate the standard processes from SCOR model, the proposed methodology is more generic. In addition, the issues of sub-model synchronisation and data distribution management in the agent-based distributed simulation implementation are taken into consideration and the corresponding solutions for these issues are proposed. Finally, an example of a supply chain network is modelled and implemented to illustrate the proposed methodology and related solutions.     

Mitigating supply chain disruptions through interconnected logistics services in the Physical Internet

This paper investigates the resilience of inventory models using interconnected logistics services in the Physical Internet (PI). With traditional supply chain network design, companies define and optimise their own logistics networks, resulting in current logistics systems being a set of independent heterogeneous logistics networks. The concept of PI aims to integrate independent logistics networks into a global, open, interconnected system. Prior research has shown that new inventory models enabled by and applied to PI could help reduce inventory levels thanks to its high flexibility. Continuing along these lines, this paper examines how inventory models applying PI deal with disruptions at hubs and plants. To attain this, a single product inventory problem with uncertain demands and stochastic supply disruptions is studied. A simulation-based optimisation model is proposed to determine inventory control decisions. The results suggest that the PI inventory model, with greater agility and flexibility, outperforms the current classic inventory models in terms of resilience. Moreover, the difference in performance increases when the product value, penalty costs and disruption frequency increases. This paper indicates a novel approach to build a resilient supply network.