OPTIMIZATION VIA SIMULATION FOR INVENTORY CONTROL POLICIES AND SUPPLIER SELECTION

Abstract

The need to explicitly select the best review model in inventory control system is greater than ever because managing and controlling inventories are difficult under intense competition. In this study, three important questions are answered in inventory control system: which review model (periodic or continuous) should be used; which objective function of review model should be used to increase competitiveness of the supply chain; how to find the optimal values of initial inventory, reorder point, and order-up-to level for each Distribution Centre (DC) and each Supplier. We proposed an Optimization via Simulation (OvS) approach to determine the best inventory control system with supplier selection and to obtain a remarkable amount of saving while increasing the competitive edge in a fully stochastic supply chain environment. According to the results, total supply chain cost can be improved at least 22 % and at most 66 % on average with proposed continuous review model.