Reducing inventory cost for a medical device manufacturer using simulation

Seeking to enter new geographic markets where expected margins are relatively tight, a manufacturer of medical devices must reduce inventory and related costs in its finished goods supply chain. The manufacturer´s supply chain includes four echelons - factories, distribution centers, regional salespeople (also known as “vans”), and customers. The amount of inventory typically held and corresponding reorder policies near the customer end of this supply chain are not known. A simulation approach was selected to provide insight into those inventory levels based on assumed reorder policies. Analysis conducted using a simulation model implemented using SimPy point to significant potential savings, with the value of inventory-related savings over a four year period approaching $200 million.