The Effects of Resupply Flexibility on the Design of Service Parts Supply Systems : A Simulation Optimization Study

We apply simulation optimization to determine the optimal design and stock distribution for a single item supply system with a one-for-one replenishment policy. We investigate both the effect of the number of echelons and the degree of resupply flexibility, considering single-echelon and two-echelon systems with either no resupply flexibility, lateral tran- shipments only or both lateral transhipments and emergency deliveries. We show that the implementation of an emergency delivery option allows an augmentation of the frac- tion of customers served by lateral transhipments and that increased resupply flexibility enables increasingly important cost savings.