Simulation-based Switching Algorithm for Inventory Management in a Multi-echelon Supply Chain

Cyclic or non-cyclic planning policies are traditionally used to manage inventories in a multi-echelon supply chain. Evaluation of the difference between performances of cyclic and non-cyclic planning policies allows analysing an efficiency of a specific planning policy at the product life cycle specific stage, and provides a control mechanism to switch from one to another policy. The paper is aimed is to present simulation-based switching algorithm that provide estimating the difference between the total costs of cyclic and non-cyclic planning policies with optimal parameters and decision making about application of an appropriate one. Simulation-based switching algorithm contains two phases: cost comparison analysis in the first phase, and advanced analysis based on additional costs of a cyclic solution (ACCS) in the second phase. A numerical example and a prototype of a switching module are described in the paper.