Strategies used in the management of the supply chain dealing with change in the demand variability could havesignificant impact on the logistics cost. Demand variability would directly impact the selection of supply chainstrategic solution and the calculated unit cost for the logistics system. The relationship between logistics strategies ofinventory policy, transportation lot size, demand mean, and demand variance are examined to evaluate the impact onthe performance of the supply chain behavior. Discrete-event simulation was developed to run eight scenarios withfour factors at two levels. The results show that increasing the average demand decreases unit cost. Any increase inthe demand variation results in an increase in unit cost with positive interaction effects with all other factors.
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