A Dynamic Replenishment System for Integrating Supply Chain functions

An integrated supply chain (SC) model comprising both the warehousing and the transportation functions of the SC is developed that can help to reduce SC inventory levels and total SC costs while maintaining and/or improving customer service levels under dynamic operating conditions. The dynamic replenishment system (DRS) is first defined in the context of a mixed integer programming (MIP) model (‘the DRS MIP model’). However, due to the unacceptably long computation times associated with the MIP formulation, a new heuristic algorithm (‘the DRS heuristic’) is developed to find good, potentially near-optimal solutions to the same static SC problem instances. The performance of the DRS heuristic is subsequently evaluated under dynamic SC conditions with the aid of discrete event simulation. The DRS heuristic is embedded into the ProModel simulation model as a callable subroutine that can be used to make replenishment and transportation decisions throughout the SC (‘the DRS simulation model’). Experimental results confirm that operating a SC under DRS simulation model constructs is a win-win relationship for SC partners. The DRS has proven to be able to meet its primary goal of reacting effectively and efficiently to normal and/or non-normal (unplanned, disruptive) SC operations. Maritime Economics & Logistics (2007) 9, 52–66. doi:10.1057/palgrave.mel.9100171