Supply Chain Management Consulting
Inventory Simulation
Overview
While Inventory Optimization selects the mathematically optimal inventory levels, Inventory Simulation demonstrates “How” the inventory levels and policies will perform in the “real world” given real demand and supply variability.
Business Problem
Are you experiencing these business challenges? Do these questions sound familiar?
Common Business Challenges
• Optimized inventory levels not generating expected service performance
• Demand or supply distribution not reflective of real variability
• Highly volatile demand or seasonality
• Extended and variable supplier lead times
• Erratic fluctuations in inventory levels
• Inconsistent or low fill rates and increasing stock-outs
Key Questions for Consideration
• Do the projected service levels resulting from an inventory optimization appear overly optimistic? Are you achieving the desired service levels?
• How does the simulation compare when I model actual historic demand (order history) compared to calculated demand variability?
• What impact does fulfillment or transportation lead time variability have on my fill rate or service level?
• What are my peaks and troughs in inventory levels? When do they occur?
Service Solution
Supply Chain Acuity’s Inventory Simulation service helps our clients validate existing or proposed inventory policies and predict fulfillment and customer service performance. We use a sophisticated supply chain simulation tool to build and run discrete event simulation models. We examine how key replenishment policies and large demand fluctuations impact actual customer service metrics such as fill rate or on-time performance, inventory levels over time, and detailed financial results. Demand can be modeled either using actual order history or a demand pattern with a variability distribution.
Delivered Benefits and Desired Outcomes
• The power to holistically understand the impact of inventory policies and variability on inventory levels across a multi-echelon supply chain network and identify improvement opportunities
• Ability to model and quickly run “What-If” scenarios to understand key inventory drivers and evaluate trade- offs between customer service level and inventory investment to plan for changing business requirements
• Validate optimized inventory levels
• Validate demand distribution assumptions
• Validate and predict expected customer service levels and location fill rates
• Understand peaks and troughs in inventory levels overtime