A three-stage simulation based approach to inventory management with discrete demand

Abstract

This paper proposes a three-stage simulation-based approach to determine target inventory level for a plastic moulding company. The classical formula of a periodic review inventory system requires continuous demand with a normal distribution. This is often not the case in real world companies. For this reason, a three-stage approach based on a SLAM II simulation model is proposed. Our model allows for a statistically based determination of target inventory level for both normal and non-normal distributed demand. This model includes inventory management, production planning and control, finished goods shipment, and functional area of manufacturing. Analysis of simulation results indicates an inventory reduction plan and the feasibility of a layout design to relocate equipment for the plant.