We have developed and applied simulation as well as combined simulation – optimization models to represent process industry plant logistics and supply chain operations. The simulation model represents plant production, inventory, and shipping operations as well as inter-plant shipments. When a combined simulation-optimization approach is used, the simulation periodically invokes a classical production planning optimization model to set production and shipping levels. These levels are retrieved by and used in the simulation model. Process industry supply chain operations include stochastic elements such as customer demands whose expected values may vary in time as well as transportation lead times. The complexity of individual plant operations and logistics must be considered. Simulation provides the methods needed to integrate these elements in a single model. Periodically during a simulation run, production planning decisions that require optimization models may be made. Simulation experimental results are used to determine service levels to end customers as well as to set rail fleet sizes, inventory capacities, and capital equipment requirements for logistics as well as to assess alternative shipping schedules.
A comparison of optimization models for lumber production planning