Supply Chain Simulation

Supply chain simulation is different to the analytical methods that have gone before. It provides dynamic details and opportunities for greater insight by expanding the design, analysis, and optimization toolset for supply chain managers. Furthermore, supply chain simulation is becoming a popular choice as the systems under study become increasingly complex.


What is supply chain simulation?


A supply chain simulation shows the behavior of a logistics network over time. The logical rules of a supply chain are represented in a model and then executed over time, making the simulation dynamic. For example, production is started when orders deplete inventory below a threshold. Such rules can be combined, and their relationships investigated as well as tested against disruptive events, like strikes and natural disasters.

Supply chain diagram

Dynamic simulation models differ from analytical models in several important ways.

An analytical model of a supply chain uses linear equations to describe operations. The benefit of this is that solutions, once found, are optimal. This is also the downside: describing a supply chain in such a way requires simplification and, consequently, the difficulty of modeling increases with complexity. Furthermore, if a solution cannot be found, an analytical model cannot be used. It should also be noted that analytical models deal only with the values they are specified to capture and are of limited use outside their scope.

Dynamic simulation models capture the rules of operation and enable you to reflect all dimensions of your supply chain. The output of a dynamic simulation model shows system behavior over time and any descriptive statistics of the workings of your supply chain can be collected. Simulation models cope well with complexity and can consider real-world randomness. If they have downside, it is that they must be verified to make sure they function as expected.

Benefits of supply chain simulation software

With the two different approaches, supply chain professionals face a choice.


When to use simulation modeling?


Modern supply chains generate a lot of data and are subject to a wide variety of risks. Both of these factors increase the complexity of analysis and favor dynamic simulation modeling.

Simulation can be used to:

  • Determine safety stock values in multi-echelon supply chains
  • Evaluate inventory policies
  • Identify bottlenecks
  • Cost service levels
  • Test the robustness of your supply chain
  • Ask what-if questions regarding, for example, new manufacturing facilities, or transport policies

Simulation is especially useful, when the underlying system is assumed to be too complex to be examined by mathematical-analytical methods. Such complexity arises due to time-dependent, random, and interacting effects within the system.

Iris Heckmann

Towards Supply Chain Risk Analytics: Fundamentals, Simulation, Optimization, 2016

Together, analytical optimization and dynamic simulation are a powerful combination of methods. They complement each other perfectly when addressing supply chain problems and provide a basis for advanced supply chain development. With anyLogistix you can model your supply chain completely and utilize the benefits of both these methods together.

Benefits of supply chain simulation software

Read our white paper to find out how the combination of supply chain analytical optimization and dynamic simulation help solve the most complex supply chain problems — Supply Chain Optimization and Simulation: Technology Overview.

How to explore your supply chain dynamics?

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