Dynamic adjustment of replenishment parameters using optimum-seeking simulation

Abstract

This paper addresses the use of discrete-event simulation and heuristic optimization to dynamically adjust the parameters within a continuous-review reorder point replenishment strategy. This dynamic adjustment helps to manage inventory and service levels in a simple supply chain environment with seasonal demand. A discrete-event simulation model of a capacitated supply chain is developed and a procedure to dynamically adjust the replenishment parameters based on re-optimization during different parts of the seasonal demand cycle is explained. The simulation logic and optimization procedure are described. Further, analysis of the impact on inventory is performed.