Development of Multi-Objective Supply Chain Model with Stochastic Demand: An Optimization Approach Based on Simulation and Scenario Development

Integration of supply chain decisions reduces costs and delivery time to customers, but uncertainty in supply chain offending parameters, including demand, disrupts this integration. This demand uncertainty has led to an increase in interest in the use of probabilistic planning and simulation models in supply chain modeling. Therefore, the overall purpose of this study was to model and develop a multi-level, multi-product, multi-period supply chain network model with conflicting objectives such as cost minimization, delivery time minimization, and maximizing system-wide reliability. The supply chain network under study had 4 levels or subsystems of suppliers, manufacturers, distributors and retailers. In this study, it was assumed that demand is random and follows a probabilistic distribution function. Therefore, the simulation technique was used to estimate costs including shipping costs and lost sales costs and other costs. After developing a multi-objective model, for the studied problem, scenario building was done based on different perspectives on inventory levels (minimum inventory, maximum inventory and average inventory level) and based on each scenario, values related to the objectives were estimated. In the end, based on the Parthian answers obtained for each case of the model, based on Vickor decision-making method, the final ranking of the answers and selection of the best case from the proposed model was performed. The results showed that the second scenario, ie considering the average inventory level, was selected as the best solution for the described model