A Simulation Approach to Evaluate Supply Chain Flexibility

Keeping safety stocks and designing flexible production systems have long been known to be effective measures for compensating variations in demand. However, current research lacks appropriate methods guiding practitioners in successfully implementing these measures. As implementing flexibility in most cases comes along with an increase in costs, the decisions which flexibility measures to implement require a trade-off between the benefit gained from an increased flexibility, and the costs which apply. The purpose of this paper is to provide a first approach to evaluating this trade-off using discrete event simulation. The concept is presented and evaluated by means of a practical scenario from the table-top product manufacturing industry using the adjustment of production lot sizes and safety stock levels as example flexibility measures. We demonstrate how our approach can be used to determine the cost-optimal flexibility configuration, and find a utilizable flexibility potential lying in different configurations of these measures.