Simulation Approach to Warehouse Cost Minimization in Stochastic Environment

Abstract

The objective of inventory management is to balance conflicting goals like keeping stock levels down to have cash available for other purposes and having high stock levels for the continuity of the production. Simulation approach is used to minimize total warehousing cost while no stock-outs occur and warehouse capacity is not exceeded. A case study of replenishment process optimization is presented on several representative materials of an automotive company using two replenishment algorithms: fix review period and full capacity ordering. The presented simulation results indicate considerable cost reduction without violating the mentioned constraints. The fuzzy logic evaluator, a decision support system used for simulation results assessment, is presented and discussed.