Managing Service-Sensitive Demand Through Simulation

A simulation-based approach for managing supply chains under service-sensitive demand is elaborated. This approach integrates simulation and analytical models. Demand parameters change in response to the short-term service level provided by the supply chain. The simulation model is used for evaluation of the current service level. The analytical models are used to update the parameters of the demand process, which depend upon the current service level, and inventory control parameters. Simulation modelling allows for setting the safety factor at the level ensuring the required long-term service level. Combination of the simulation and analytical models in the runtime regime is vital for modelling the service-sensitive demand.

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