Simulation of inventory control systems

Abstract This article describes a simulation system developed to simulate a number of different inventory control systems under different assumptions. The article is divided into three parts. (1) A description of the objectives of the simulation system. (2) A description of the structure of registers in the simulation system. The product register can hold up to 255 products with product specific information on, for example, relevant costs, lead-time and demand. The model register describes how inventory control functions. There is a choice of two inventory control structures and several inventory models. The simulation register contains information about the simulation procedure. (3) Some examples illustrating the potentialities of the simulation system. The first example illustrates the consequences of using inventory models assuming constant lead-time, when lead-time actually is stochastic. The second example illustrates the effect of using an inventory model assuming that the review period is zero, when the review period actually is positive. The third example illustrates the effect of using different forecast models. The last example demonstrates how the simulation system can be used to obtain simulated values of service and stock on hand for a specific inventory model. The simulated results are compared with corresponding theoretical results — both exact and approximative results.