Empirical Grounded Simulation Models for Make-To-Order (MTO) Supply Chains: An Application in the Furniture Industry

The Make-to-Order (MTO) supply chain seeks to balance cost reduction with satisfactory customer service, especially concerning order lead times. Simulation plays a vital role in this balance, identifying risks, analyzing scenarios, and evaluating key performance indicators. However, existing simulation models often overlook suppliers and inventory management, focusing more on production, sales, and distribution. To address this, a simulation model tailored for the furniture industry integrates supplier selection with inventory management strategies, considering geographical complexities. Through a case study, various scenarios are assessed, revealing a trade-off between lead times and costs. Close MTO suppliers decrease lead times but increase costs due to transportation expenses, while distant sourcing minimizes costs but extends lead times, challenging customer expectations. This simulation model offers insights for MTO companies navigating supplier selection and inventory management, enhancing decision-making and customer satisfaction. Future research aims to expand the model into a supply chain Digital Twin, incorporating resilience and risk management to tackle broader MTO supply chain challenges.