Supply chain simulation is the computer-based modeling of a real supply system. Simulation enables an organization to analyze and experiment with its existing supply chain process in a virtual setting including all dynamics and uncertainties that real life supply chains are subject to.

Optimization is the process of finding “the best” or “optimal” result out of a feasible set of solutions while meeting supply chain business constraints. It is necessary that decisions are  quantifiable: both a quantifiable objective function (that is optimized), as well as a set of quantifiable constraints is needed. Then it is possible to create a mathematical formulation that can be ‘optimized’.

Supply chains encounter an increasingly complex market environment where the number of competitors are expanding and where customers have higher expectations. For these reasons it becomes more important for producers to minimize the costs and inventory while maintaining high flexibility and delivery reliability. But as the complexity of supply chains increase it also means that supply chains are very hard to accurately optimize for all variables.