Preparing for Peak Season with Inventory Scenario Simulations
Planning for seasonal spikes in demand can be extremely challenging for product-based businesses. Reducing some of the uncertainty can significantly improve customer service levels and margins while also minimizing your inventory investment. Here are the steps needed to get started:
1. Define Variables: This includes a method for randomly generating normally distributed demand (see below).
2. Lead Time: You can use either static or randomly generated lead times, but I suggest starting with static.
3. Inventory Levels: Build a model that calculates your periodic ending inventory balances using random demand and incoming orders.
4. Costs: Include costs for inventory, stock outs, and holding costs.
Next, set up your iteration model to randomly generate demand and incoming orders. This will simulate changes in on-hand inventory levels, costs, and stock out frequency and size.
Run your simulation using one set of defined variables to get an average result. This might require 1,000 to 10,000 iterations, which is best handled by a VBA macro. Once you’re comfortable with the results, modify your variables and compare them to your initial iteration.
If this sounds complex, we have a solution! Click the link below to get a free copy of our OptiStock Simulation model and start solving your peak inventory challenges.
Get the free model
Learn more about inventory simulation
Reach out with questions.
