Simulating order fulfillment and supply planning for a vertically aligned industry solution business

Abstract

We model supply chain of an industry solution equipment manufacturer, where the merchandise is sold worldwide, but suppliers are mostly located in Asia. The preferred shipment of supply is the ocean shipment, and it takes about 5 weeks. Premium air shipment can be used to expedite delivery, but it costs substantially higher. To hedge against variability of demand and to satisfy customer service level, a certain level of safety stock is needed but inventory carrying cost can be high. Therefore, a careful fulfillment strategy is very important to balance serviceability and cost. A supply chain simulation model is developed to analyze the order fulfillment and supply planning process for the business to identify efficient supply chain strategy. The model simulates and evaluates three key performance metrics; serviceability, inventory costs and premium transportation costs, and their interactions. © 2008 IEEE.