SIM Cold Chain (Safety Stock Estimation)

Effective supply chain management is a difficult, multifaced task: keeping inventory policies balanced and cutting operational costs, including transportation, production, and distribution expenses. That’s why drugstores executive management decided to rent new facilities for its cold chain.

This problem can be solved by following the steps below:
  1. Greenfield Analysis
  2. Multi-Echelon Greenfield Analysis
  3. Safety Stock Estimation
  4. Risk Analysis

With the aid of Greenfield Analysis we found the optimal number of regional sites and their locations (considering the maximum distance between drugstores and facilities). We also found the optimal location for the distribution center. 

The next step is inventory planning. The Safety stock experiment is used to define the safety stock that will maintain the desirable service level.

We consider a supply chain in England with three suppliers of medications in Lincoln, Sudbury, and Amesbury. These suppliers deliver products to 100 drugstores located in the largest cities of England through the DC located in Milton Keynes and 6 regional sites.

Demand for the following medications is of periodic nature: antihistamines, vitamins, stomachic medications, cardiac medications, analgesics, reliever medications, ophthalmic, neurological drugs and cold medicines. Drugstores are supplied in a certain order, which allows the trucks to fetch orders for several destination points and follow the route, visiting customer per the specified order. Once the final destination point of the milk run has been served, trucks head to the positioning regional site.

The goal is to cut carrying costs without sacrificing the service level.

The result of the experiment offers optimal product stock volume and properly configured inventory policies with the optimized safety stock.


Related topics

Importing examples 

Running the Safety stock estimation experiment