The value of simulation in modeling supply chains

Abstract

In business today, re-engineering has taken a great deal of the cost out of internal corporate processes. Our factories and internal support organizations have become much more efficient, but there is still a great deal of unnecessary cost in the overall delivery system, or the supply chain. Although your corporation does not own all of the supply chain, the entire chain is responsible for product delivery and customer satisfaction. As one of several methodologies available for supply chain analysis, simulation has distinct advantages and disadvantages when compared to other analysis methodologies. This paper discusses the reasons why one would want to use simulation as the analysis methodology to evaluate supply chains, its advantages and disadvantages against other analysis methodologies such as optimization, and business scenarios where simulation can find cost reductions that other methodologies would miss.

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