Simulation-based optimisation of multi-echelon inventory systems

Multi-location inventory models are one of the most widely investigated fields in mathematical inventory theory, but the analytically tractable models suffer from various restrictive assumptions. To overcome these restrictions simulation can be used. However, simulation is not an optimisation approach. Therefore, we propose the simulation optimisation approach where a simulator is combined with an appropriate optimisation tool.In the present paper, we show that simulation optimisation successfully can be applied to define optimal policies in very general multi-echelon inventory systems. A numerical example shows the usability of our approach.     

Determining the Maximum Hourly Demand of Natural Gas for Large Suppliers

This article deals with the determination of the maximum hourly energy consumption of large (municipal) natural gas suppliers using the Monte Carlo simulation method. To ensure an adequate supply for all their customers, suppliers need to purchase capacities in geological storage systems. If, due to cost considerations or inaccurate predictions, the chosen capacities are smaller than the actual consumption, additional costs are incurred for the procurement of short-term quantities of gas, e.g. from the balancing energy market. It is therefore necessary to formulate and solve an optimisation problem, which is done as described in the following by means of a simulation after modelling all required quantity values and price data. The aim is to minimise the structure costs—i.e. the fixed capacity costs and the variable balancing energy costs—by selecting the most appropriate hourly energy supply level. Since the selection of the storage capacity generally has far-reaching financial implications, the statistics-based simulation method described in the following is intended to provide the companies concerned with a reliable basis for decision-making.     

Promoting structural adjustment in agriculture: The economics of New Entrant Schemes for farmers

We examine the efficacy of incentives for new entrants to farming as an alternative to early retirement schemes for farmers. We briefly review previous studies on the effectiveness of Farmer Early Retirement Schemes in promoting structural adjustment in agriculture and conclude that the economic case for these schemes seems weak. We then employ a dynamic farm optimisation model, incorporating a realistic specification of farmer decision-making, on an original Northern Irish dataset to analyse ex ante the possible impacts of New Entrant Schemes. We find a more positive potential impact from these schemes, particularly the option of an interest rate subsidy on farm development loans. This is attributed to the dynamic effects of the farm investments associated with such schemes, a likely reflection of the long-term effects of differences in age related lifecycle goals. Younger farmers have a longer planning horizon and tend to invest more heavily in business growth than comparable older age groups.     

The reactive system screening tool (RSST): An easy,inexpensive approach to the DIERS procedure

The RSST DIERS vent sizing methodology is revised to provide realistic design equations for reactive systems consistent with available large-scale experience. Using easy to obtain RSST data such as rate of temperature rise and rate of pressure rise excellent agreement is illustrated for hybrid, vapor and gassy reactive systems.     

Implementation of value-driven optimisation for the design of aircraft fuselage panels

The work presented investigates a methodology for the implementation of value-driven design (VDD) with application to the optimisation of aircraft fuselage panels. The VDD approach integrates manufacturing and operating costs as optimisation drivers at the design stage. In particular, manufacturer's profit, airlines expenses and revenue, and surplus value relating to competitor products are taken into account in the objective function proposed for the design optimisation. The study shows that using VDD concepts, the manufacturer has the possibility to develop more efficient designs with an increase of both his own profit and the operator's gains.     

Modelling consumer-directed substitution

We discuss the challenges and difficulties arising when approaching and modelling the consumer-directed substitution problem in quick response supply chains. Further, we propose heuristic solutions suited for large problems with complex uncertainty and dependency patterns. Despite the single-period newsvendor model we use, our substitution process is an approximation of the dynamic product choice. To ensure consistency with regard to the information used to establish substitution fractions and information available at the time of optimisation, substitution fraction estimation and inventory/assortment optimisation are discussed simultaneously. The decision-independent substitution preferences applied here do not require inventory or sales transaction data, but reflect understanding on the demand driver attributes. This approach, in turn, leads to increased robustness in assortment planning. Factual substitution is an outcome of the optimisation process, constrained by the available substitutes and unfulfilled demand.Despite being unable to fully describe the dependencies among the substitute choice possibilities, our substitution approach, together with the modelling process, allows handling the most important dependencies, such as negatively correlated substitute choice possibilities and positively/negatively correlated first and second choice possibilities.     

Data-driven simulation of the supply-chain—Insights from the aerospace sector

With the increasing complexity of supply chains in aerospace manufacturing, simulation has become a powerful tool to assess performance. Conventional simulation models are constructed by experts, limiting their usefulness for non-experts. Here, the concept of data-driven simulation is used, where the simulation model is constructed automatically using input data from company IT systems. The paper describes the concept and operation of a supply-chain model builder that has been developed. An example model is provided from the civil aerospace sector. The study shows that data-driven simulation can be useful to support the design and improvement of supply chains. The nature of the conceptual model, model verification and validation in data-driven simulations are discussed. Data-driven simulation is not a replacement for general-purpose simulation tools, but an adjunct valuable in certain circumstances. It can allow a variety of scenarios to be explored relatively quickly without a high level of simulation expertise.     

Innovativer Energiespeicher Bundeswasserstraßen

The present analysis provides a contribution to the question of how a system integration of large-scale energy storages can be implemented. It is to be investigated if and how federal waterways can be used for this purpose. Initially, a baseline study was carried out in which the federal waterways are systematically assessed with regard to their suitability for/as energy storage systems. Apart from the technical and the hydro mechanical implementation of the storage process, the advantages and disadvantages of the federal waterways in comparison to conventional pump storage stations play a significant role. A presentation and classification of the potentially available canal sections provides an overview of the suitable storage systems of the federal waterways. A specifically designed storage simulation on the basis of a sample application is used, in order to determine the capacity of the canal system for energy storage. Consequently, the simulation showed the theoretical capability of the federal waterways as energy storage systems, through their ability to balance the load and temporal fluctuations of the energy input. The simulation program Matlab was used on the basis of the synthetic load and delivery profiles. Finally, based on the example of the ships lock in Uelzen and the Scharnebeck boats lift, a simulation of the possible re-equipping options will be described, technically abstracted, economically analysed and combined with renewable energy facilities within a virtual power plant. The detailed formulation of further approaches and the calculation of possible application scenarios play a central role within this analysis.     

Quantifying value chain analysis in the context of livestock systems in developing countries

The analysis of value chains has augmented our knowledge on the complexities, inter-linkages, distributional benefits, and institutional arrangements of production and marketing channels in developing countries. However, the analysis remains relatively qualitative and case-specific, with limited ability to rank or assess the impact of alternative interventions or to analyze sufficiently the complex market dynamics and feedbacks present in livestock systems. This paper offers theoretical and applied insights on ways to improve the analytical rigor of the value chain methodology that combines both qualitative and quantitative approaches.     

Will It Spread or Not? The Effects of Social Influences and Network Topology on Innovation Diffusion

Innovation diffusion theory suggests that consumers differ concerning the number of contacts they have and the degree and the direction to which social influences determine their choice to adopt. To test the impacts of these factors on innovation diffusion, in particular the occurrence of hits and flops, a new agent‐based model for innovation diffusion is introduced. This model departs from existing percolation models by using more realistic agents (both individual preferences and social influence) and more realistic networks (scale free with cost constraints). Furthermore, it allows consumers to weight the links they have, and it allows links to be directional. In this way this agent‐based model tests the effect of VIPs who can have a relatively large impact on many consumers. Results indicate that markets with high social influence are more uncertain concerning the final success of the innovation and that it is more difficult for the innovation to take off. As consumers affect each other to adopt or not at the beginning of the diffusion, the new product has more difficulties to reach the critical mass that is necessary for the product to take off. In addition, results of the simulation experiments show under which conditions highly connected agents (VIPs) determine the final diffusion of the innovation. Although hubs are present in almost any network of consumers, their roles and their effects in different markets can be very different. Using a scale‐free network with a cut‐off parameter for the maximum number of connections a hub can have, the simulation results show that when hubs have limits to the maximum number of connections the innovation diffusion is severely hampered, and it becomes much more uncertain. However, it is found that the effect of VIPs on the diffusion curve is often overestimated. In fact when the influence of VIPs on the decision making of the consumers is strengthened compared with the influence of normal friends, the diffusion of the innovation is not substantially facilitated. It can be concluded that the importance of VIPs resides in their capacity to inform many consumers and not in a stronger persuasive power.     

Cobacabana (control of balance by card-based navigation): A card-based system for job shop control

Existing card-based production control systems such as Kanban are mostly dedicated to repetitive production environments. Cards-based systems for job shop control are lacking, while particularly this industry segment shows a need for simple control systems. This paper aims at filling the gap by presenting a simple card-based system for job shop control, the Cobacabana (control of balance by card-based navigation) system. It is based on the concept of workload control (WLC), which has already proven its value in job shops. Developments towards more robust norms now allow for transforming the WLC concept into a simple card-based system, with loops of cards accompanying orders from release until completion at critical work centers. Cards returning from work centers authorize the planner to release new orders. A card-based display supports the planner with an overview of the shop floor situation, based on non-released cards. An additional loop of cards between sales and planning enables support of the order acceptance and due date promising function. A card-based acceptance display indicates what delivery dates are realistic, considering the current workload situation. Both the scientific roots of the system and practical implementation issues are discussed in this paper.     

Strategy as guided evolution

In this paper, we build on a detailed case study and the theories of evolution in social and cultural systems and intraorganizational ecology to develop a model of strategy as guided evolution. Its primary distinctions from earlier models of organizational and intraorganizational ecology lie in (i) the incorporation of an important—yet realistic—role of top management in shaping the direction and outcomes of the evolutionary processes within firms, and (ii) the incorporation of human and social capital as a critical unit of selection within such processes. We describe the model and discuss the evolutionary and ecological processes associated with it. Copyright © 2000 John Wiley & Sons, Ltd.     

Evaluation of two schedule control techniques for the development and implementation of new technologies: a simulation study

Abstract
The development and implementation of new technologies are areas of engineering and technological management which are subject to uncertainty. To assist management in dealing with the effects of uncertainty, control systems can be used for projects. In particular, for projects in which new technologies are used, control systems can be very useful because of the lack of experience in the new fields. The systems enable the deviations from schedule to be seen and assist management by identifying the corrective actions that are required.
This study compares the value of Critical Path Methods and an Earned Value Method by the use of a simulation approach.     

Measuring the consumer benefits of improving farm animal welfare to inform welfare labelling

Policy makers in the European Union are envisioning the introduction of a community farm animal welfare label which would allow consumers to align their consumption habits with their farm animal welfare preferences. For welfare labelling to be viable the market for livestock products produced to higher welfare standards has to be sufficiently segmented with consumers having sufficiently distinct and behaviourally consistent preferences. The present study investigates consumers’ preferences for meat produced to different welfare standards using a hypothetical welfare score. Data is obtained from a contingent valuation study carried out in Britain. The ordered probit model was estimated using Bayesian inference to obtain mean willingness to pay. We find decreasing marginal WTP as animal welfare levels increase and that people’s preferences for different levels of farm animal welfare are sufficiently differentiated making the introduction of a labelling scheme in the form of a certified rating system appear feasible.     

Simulation optimization-based decision support tool for steel manufacturing

To buffer against increasing global competition and variability in the price of raw materials, steel manufacturers continuously strive to improve operations and lower costs. In this research, we employ a simulation optimization approach to develop a decision support tool to aid in strategic and operational decision-making. Specifically, we investigate work-in-process inventory levels and potential manufacturing process modifications to reduce utilization costs. A simulation model captures the complex nature of the system while an optimizer searches the solution space and sends trial solutions to the simulation for evaluation. Experimentation suggests that significant daily cost savings are possible by modifying current inventory practices and production process capabilities. Overall, the work demonstrates the ability of the solution approach to analyze complex industrial systems and identify potential improvements in a short time frame.     

Simulations of Savings Associations Using Alternative Mortgage Instruments

This paper reports on the development and use of a deterministic, accounting identity, simulation computer model of a federally chartered savings and loan association to observe the effect upon earnings and net worth growth, over the 1964 to 1974 period, of the use of various alternative mortgage instruments. Experiments were conducted on several kinds of variable rate mortgages, graduated payment mortgages, and price level adjusted mortgages; various interest reference rates were tested along with alternative systems of constraining VRM changes, alternative graduation rates, and various systems for paying interest to savers.     

Developments of the German Heat Market of Private Households Until 2030: A Simulation Based Analysis

The paper at hand studies the future development of the German heat market of private households until 2030 using a microeconomic simulation model developed by the authors. The model simulates the development of insulation measures and installed heating systems in the building stock, thereby incorporating a discrete choice model to represent the household decisions for heating systems. Because of the long lifetime of heating systems, the residential heating market adopts slowly. Natural gas fired burners still remain the most important heating system until 2030 whereas fuel oil technologies further lose market shares. Final energy consumption is projected to decrease by about 20?% between 2010 and 2030 primarily due to modernization of heating systems and therefore a higher fuel efficiency. Accordingly, sectoral greenhouse gas emissions will decrease by 24?%.     

A mixed spectrum management framework for the future wireless service based on techno-economic analysis: The Korean spectrum policy study

The evolution of radio technology and various services has increased the world's dependence on wireless communications. The demand for and value of spectrum resources therefore are also increasing. Spectrum efficiency is the most important factor in managing spectrum scarcity. However, under the current spectrum management approach, it is difficult to adopt innovative technologies that improve spectrum efficiency and flexible usage in the current dynamic wireless market. Recently, there have been several approaches to improve efficient use of spectrum resources, and each approach has its own advantages and disadvantages. Therefore, this research first discusses current issues and analyzes relative social welfare based on the different characteristics of technology and market conditions to compare various attributes of each approach. Based on the techno-economic simulation results, this paper introduces a mixed spectrum management framework for the future wireless service and support policy makers’ decision making. Furthermore, the mixed spectrum policy to spectrum management in Korea is proposed to find a more realistic and efficient spectrum management policy.     

Selecting make-to-stock and postponement policies for different products in a chemical plant: A case study using discrete event simulation

We present a guideline for selecting the inventory management policy for a specialty chemical plant that produces products with limited shelf life, by producing multiple grades of bulk chemical and packaging them into a large variety of bottles. The policy for each product was selected based on a cost-benefit analysis, using the multiple objectives of maximizing the on time order fulfillment, minimizing the production (cleaning and shelf life expiration) and inventory costs. To generate realistic cost estimates, we developed a discrete event simulation model that included demand variability, planning and scheduling policies, and operational details. We evaluated three different policies: make-to-stock (MTS), postponement, and combined MTS/postponement. We also evaluated different storage media and optimized the number of storage units for products selected for postponement. A combined MTS/postponement policy, in which postponement is applied to products with low to medium demand and high expiration provided lowest costs without significantly impacting the customer on time order fulfillment. For all other products, a MTS policy is applied to maximize order fulfillment on time, reduce cleaning costs and to reduce number of storage units.