Network Simulation Method for the evaluation of perturbed supply chains on a finite horizon

Due to lead times and other delays in a chain, the Net Present Value (NPV) can be easily estimated if Laplace transforms in MRP models are employed. This leads to the estimation of NPV on an infinite horizon. However, for the simultaneous perturbations of several parameters in a supply chain and act...

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Bibliographic Details
Published in:Central European journal of operations research 2021-09, Vol.29 (3), p.823-839
Main Authors: Campuzano-Bolarín, Francisco, Marín-García, Fulgencio, Moreno-Nicolás, José Andrés, Bogataj, Marija, Bogataj, David
Format: Article
Language:English
Subjects:
Business and Management
Circuits
Estimation theory
Horizon
Interest rates
Laplace transforms
Logistics
Material requirements planning
Net present value
Operations research
Operations Research/Decision Theory
Parameters
Perturbation
Simulation
Stochastic processes
Supply chains
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Summary:Due to lead times and other delays in a chain, the Net Present Value (NPV) can be easily estimated if Laplace transforms in MRP models are employed. This leads to the estimation of NPV on an infinite horizon. However, for the simultaneous perturbations of several parameters in a supply chain and activities running on the finite horizon, NPV could be overestimated. Therefore, we suggest the parallel use of the Network Simulation Method (NSM) with the MRP theory to reduce these overestimations. This paper aims to present the NSM to evaluate supply chains on a finite horizon when stochastic behaviour of time delays and other perturbations of parameters are also essential, which is typical for food and drug supply chains. The circuit simulator NGSPICE, which was previously used by certain authors in thermodynamics, also evaluates the financial consequences of simultaneous perturbations in a finite chain. This approach holds better for the stochastic processes of simultaneous perturbations, compared to our results achieved using MRP theory without these corrections. As presented in the numerical example, the shorter the horizon and lower the interest rate, the more important it is to use the correction factors obtained from the NGSPICE simulator.
ISSN:1435-246X
1613-9178
DOI:10.1007/s10100-021-00748-3