Revenue and production management in a multi-echelon supply chain

This paper models a supply chain problem and employs simulation-based optimization to analyze it. The model represents a manufacturer of multiple products from multiple raw materials that has control over the price of the products. The decisions to be optimized in the model are ordering policies of raw materials, inventory control of finished goods, manufacturing capacity of each product, and prices set on the products. The uncertainties involved are lead times of ordering inventory and the demand of the products. We consider the case of periodic review of raw materials and finished goods inventories on discrete time. The objective is to find the best configuration of the system to maximize profit. We show how simulation-based optimization could find the best configuration through an example.