A Simulation Approach to Evaluate Supply Chain Flexibility

Pfeiffer D, Anwander S, Hellingrath B

Abstract

Keeping safety stocks and designing flexibleproduction systems have long been known to beeffective measures for compensating variations indemand. However, current research lacks appropriatemethods guiding practitioners in successfullyimplementing these measures. As implementingflexibility in most cases comes along with an increasein costs, the decisions which flexibility measures toimplement require a trade-off between the benefitgained from an increased flexibility, and the costswhich apply. The purpose of this paper is to provide afirst approach to evaluating this trade-off usingdiscrete event simulation.The concept is presented and evaluated by meansof a practical scenario from the table-top productmanufacturing industry using the adjustment ofproduction lot sizes and safety stock levels as exampleflexibility measures. We demonstrate how ourapproach can be used to determine the cost-optimalflexibility configuration, and find a utilizable flexibilitypotential lying in different configurations of thesemeasures.