A Study On System Dynamics Simulation Of Inventory Control In Supply Chain

Inventory control is one of important activities in supply chain management and plays an important role in the corporation of supply chain. Especially in an increasingly global marketplace, customers' needs and expectations are showing more uncertainty, diversity and dynamics, and the life cycle of commodity and the response time for enterprises are getting shorter continuously. Therefore, today's enterprises are facing more competitive environment and more serious global competition with no boundary limit, which intensifies the complexity and dynamics in inventory control in supply chain, and makes it more and more difficult to coordinate inventory control. Now, managers and researchers are always exploring the ways to enable the collaborative control among system cost, inventory oscillation and "Bullwhip Effect" in supply chain. There are still many topics to discuss and study in inventory control, which is very meaningful for theory research and practice. Allowing for the complexity, dynamics and time delay in inventory control in supply chain, this paper takes advantage of the method of System Dynamics to study the dynamic behavior patterns in a two-level supply chain.Firstly, based on the review of the theory of System Dynamics, its characters and modeling meachanism are analyzed through the simulation descriptions of dynamic behaviors in first-order system, second-order system and two simple inventory control models such as fixed-quantity model and fixed-time model. Then the complexity, dynamics and time delay in inventory control are discussed in supply chain, and several kinds of research methods of inventory control are compared. Finally, the feasibility of application of System Dynamics on inventory control is analyzed based on above discussion.Secondly, the causal loop diagram and the system dynamics model of a two-level supply chain with a traditional inventory policy are constructed based on the analysis of the process of a traditional supply chain, and the validity of model is tested. Then the "Bullwhip Effects" and the inventory oscillations in a traditional supply chain are quantitatively studied through the dynamic simulations under step demand, random demand and sine wave demand. Finally, the mechanism of a traditional inventory policy is proposed according to the comparison of simulation results.Thirdly, based on the analysis of the mechanism of a two-level supply chain with time-based consolidation replenishment for VMI (TCR-VMI), the causal loop diagram and the system dynamics model of a two-level supply chain with TCR-VMI are developed as well as a two-level supply with quantity-based consolidation replenishment for VMI (QCR-VMI), and the validity of models is tested.Fourthly, the "Bullwhip Effects" and the inventory oscillations in TCR-VMI and QCR-VMI are quantitatively studied through the dynamic simulations under step demand,...