Monte Carlo Simulation of Stochastic Transition Times in a Single-Line, Multi-Product Dairy for Projection of Safety Stock Levels

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Publication/Presentation Date



Decision Sciences Institute Annual Meeting. Baltimore, Maryland. Nov. 2008


Description: "Optimal methods for production scheduling in the dairy industry have been explored, but have been limited to use of deterministic estimates for stochastic transition times. Safety stock levels may be determined based on these same deterministic estimations, but benefit significantly from stochastic representation of these times. This paper presents a Monte Carlo simulation model that represents the stochastic transition times using fitted statistical distributions. The frequency of defects is varied in repeated simulations, and a distribution to forecasts number of defective bottles based on order size and defect rate is developed. This distribution becomes the basis for determining appropriate safety stock levels for each product type."

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