Development of simulation models allows performance analysis of multi-echelon inventory networks, and this part of supply chain is not well-established research area. Moreover, by encapsulating all major characteristics of multi-echelon system, the simulation modeling does not allow only its study, but also it provides the means to achieve the desired system performance. This paper deals with a multi-echelon distribution inventory system made of suppliers, distributors and retailers. The retailer faces stochastic demands placed by customers and replenishing from its distributor, which in turn procures from its supplier at the upstream of the chain. The main purpose of this simulation model is to analyze the multi-echelon distribution system behavior according some key performance metrics such as cost and backorder, as well as customer service level at each echelon.

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Multi Echelon Distribution System (MEDS) is a multifaceted system focusing on integration of all factors involved in the entire distribution process of finished goods to customers. This paper proposes a simulation framework at the operational level of MEDS. The proposed model includes three echelons, based on discrete-event simulation approach, where the performed operations within our system are depending on several key variables that often seem to have strong interrelationships. It is necessary to simulate such complicated system, in order to understand the whole mechanism, to analyze the interactions between various components and eventually to provide information without decomposing the system. The simulation framework is used to evaluate the performance of the considered system at initial conditions and to compare it with different scenarios generated by simulation running. The study concludes with an analysis of system performance and the finding results according to each scenario.

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