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Multi-Echelon Inventory Simulation: Understanding Rolling MRP in Action

simulation

Interactive Supply Chain Planning

Multi-echelon inventory optimization is one of the most complex challenges in supply chain planning. Traditional static planning models fail to capture the dynamic nature of demand variability, lead times, and the cascading effects across distribution tiers.

This interactive simulation demonstrates a three-tier supply chain (Factory → CDC → LDC → Customer) with rolling Material Requirements Planning (MRP). Watch as the system recalculates planned receipts each day, respecting planning time fences that freeze receipts within lead time windows while dynamically adjusting future orders.

How It Works

The simulation models a realistic supply chain scenario:

  • Three-tier structure: Factory (7d lead time) → CDC (3d lead time) → LDC (5d lead time) → Customer
  • Rolling MRP: Receipts recalculate daily to maintain inventory above safety stock levels
  • Planning Time Fence: Receipts within lead time are frozen; future receipts are recalculated
  • Dynamic demand: Realistic variation with weekday patterns, seasonality, and random fluctuations
  • Peak demand injection: Test how the system responds to sudden demand spikes

Key Concepts Demonstrated

Rolling MRP

Unlike static planning, rolling MRP recalculates planned receipts each day based on current inventory levels and projected demand. This ensures the plan stays aligned with reality as conditions change.

Planning Time Fence

The planning time fence marks the boundary between frozen and flexible planning. Receipts scheduled before NOW + Lead Time are frozen (cannot be changed). Receipts beyond this fence are recalculated each day.

Multi-Echelon Demand Propagation

Demand at the LDC level propagates upstream as planned receipts, creating demand at the CDC level. CDC demand then propagates to Factory. This cascading effect is what makes multi-echelon planning complex.

Lot Sizing

The system uses lot sizing periods to batch orders efficiently. Instead of ordering daily, orders are accumulated over a period (e.g., 3 days for LDC) to reduce ordering frequency and costs.

Try It Yourself

Use the interactive controls to:

  • Adjust starting inventory levels at each tier
  • Modify lead times and lot sizing periods
  • Change demand variability to see how uncertainty affects planning
  • Hold the peak demand button to inject sudden demand spikes
  • Watch how the system responds in real-time

What You'll Observe

As you interact with the simulation, notice:

  • How inventory levels fluctuate across all three tiers
  • The timing of planned receipts relative to the planning time fence
  • How demand variability creates ripple effects upstream
  • The difference between frozen (within lead time) and flexible (beyond lead time) planning
  • How peak demand injections affect future planning decisions

Real-World Applications

This simulation demonstrates principles used in:

  • Distribution network optimization
  • Safety stock placement across echelons
  • Lead time management and reduction initiatives
  • Demand sensing and response planning
  • Supply chain resilience planning

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