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