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SIM Cold Chain (Safety Stock Estimation)

Drugstores executive management decided to rent new facilities for its cold chain.

Effective supply chain management is a difficult, multi-faced task: keeping inventory policies balanced and cutting operational costs, including transportation, production, and distribution expenses.

This problem can be solved by following the steps below:
  1. Greenfield Analysis
  2. Multi-Echelon Greenfield Analysis
  3. Safety Stock Estimation
  4. Risk Analysis

First, we use Greenfield Analysis to find the optimal number of sites and their locations (considering the maximum distance between drugstores and facilities). We also found the optimal location for the distribution center. The experiment considers minimum data:

  • Customers locations
  • List of products
  • Aggregated demand for each customer

The next step is inventory planning. The Safety stock experiment is used to define the safety stock that will maintain the desirable service level.

We consider a supply chain in England comprising:

  • 100 drugstores located in the largest cities of England
  • Three suppliers of medications in Lincoln, Sudbury, and Amesbury
  • DC located in Milton Keynes
  • 6 regional sites

Demand for the following medications is of periodic nature:

  • Antihistamines
  • Vitamins
  • Stomachic medications
  • Cardiac medications
  • Analgesics
  • Reliever medications
  • Ophthalmic
  • Neurological drugs
  • Cold medicines

Drugstores are supplied in a certain order, which allows the trucks to fetch orders for several destination points and follow the route, visiting customer per the specified order. Once the final destination point of the milk run has been served, trucks head to the positioning regional site.


Cut carrying costs without sacrificing the service level.


The result of the experiment offers:

  • Optimal product stock volume in the Safety Stock Estimation page
  • Properly configured inventory policies with the optimized safety stock that will maintain the desirable service level (for all DCs and sites)
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