Modelling a complex supply chain: understanding the effect of simplified assumptions

Abstract

The benefits of coordinating activities and consolidating distribution points in supply chains are well highlighted and intuitively logical. However, the impact of these decisions on the overall performance of a complex supply chain may not be as obvious as usually perceived. This study models a relatively complex supply chain and evaluates the impact of simplifying demand and lead time assumptions under various supply chain configurations. Of particular interest is the investigation of the effect of risk pooling and the synchronization of production cycles in a multi-level multi-retailer supply chain under the influence of various parameters such as batch size, delivery frequency and ordering cycle. This study highlights the extent of complicated interaction effects among various factors exist in a complex supply chain and shows that that the intricacy of these effects can be better understood with a simulation model.