A Comparison Of Inventory Optimization And Discrete-Event Simulation For Supply Chain Analysis

This 3M Company supply chain case study compares inventory optimization and discrete-event simulation methodologies, and presents an iterative approach between an optimization model and a discrete-event simulation model. We know that modeling provides value-added decision support for complex inventory management problems. The inventory optimization model assists in making the best decision in the tradeoff between cost and customer service, in specific system states. On the other hand, the discrete-event simulation model quantifies the impact, over time, of inventory management policies, thus illustrating feasibility and ranges of system performance. Is one approach "better" than the other? Could coupling the two models improve the solution? Each method has its own limitations and its own contribution to decision making, which are highlighted in this case study.