Simulation-based optimisation for material dispatching in Vendor-Managed Inventory systems

Simulation-based optimisation for material dispatching in Vendor-Managed Inventory systems

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Article ID: iaor20082127
Country: United Kingdom
Volume: 3
Issue: 4
Start Page Number: 238
End Page Number: 245
Publication Date: Nov 2007
Journal: International Journal of Simulation and Process Modelling
Authors: ,
Keywords: supply & supply chains
Abstract:

This paper examines a problem related to replenishing inventories at retailers in distribution networks operated under the paradigm of Vendor Managed Inventory. In the real world, complexity in analysing such systems arises out of numerous factors, including several random variables and a multitude of costs in the system. Much of the literature makes simplifying assumptions about these factors to develop tractable mathematical models. In this paper, we develop a simulation-optimisation approach that can accommodate most of these factors. In our experiments, our approach outperforms a heuristic used in a local industry and a heuristic developed from the newsvendor model.

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