Stochastic Models For Enhancing Agility of Supply Chains

This paper deals with the application of stochastic inventory model to the three-tier supply chain and verifying the values obtained by mathematical model with discrete event simulation. We investigate three-stage serial supply chain with stochastic demand and fixed replenishment lead-time. Inventory holding costs are charged at each stage, and each stage may incur a consumer backorder penalty cost charged by primary supplier to secondary supplier. The customer-demand follows Poisson distribution. We implement Base Stock model for inventory control at both suppliers. Computer simulation is then designed in such a way that it satisfied all the assumptions for mathematical model. Simulation is run to validate the results obtained from the mathematical model