A simulation study with quantity flexibility in a supply chain subjected to uncertainties

Abstract

Coordination in supply chains is of vital importance to reduce the impact of system dynamics, which are usually caused by, but not limited to, uncertainty in terms of demand, supply, process, etc. Under such a distributed environment, supply chain problems can be formally modelled as a distributed constraint satisfaction problem (DCSP). The objectives of this paper are threefold: (i) to model a supply chain from the DCSP perspective; (ii) to develop a coordination mechanism in such a distributed supply chain with quantity flexibility for inventory management; and (iii) to examine the usefulness of the proposed methodology through a series of simulation studies. Results are compared with a stochastic model with the system subject to the same independent variables: demand and supply uncertainties. Simulation results indicate that the proposed mechanism can successfully filter the impact of the said uncertainties on the system performance including system cost, retailer cost, supplier cost, inventory cost and fill rate.