- 1 - Demand Behavior in Manufacturing Supply Chain - Model , and Computational Study

Production planning policies have a direct impact on demand propagation and the overall performance of manufacturing supply chains. The relationship between production planning and supply chain behavior is important because the planning decisions play a major role in determining how demand propagates through the supply tiers. In this paper, we study supply chain demand behavior via computational experiments. The purpose of our study is to examine the experimental results against the propositions from (Wu and Meixell, 1998), and to gain a better understanding of the demand behavior and the operational costs. For the purpose of studying supply chain behavior, we first develop a solution method for the multi-level, multi-period lot-sizing model on which the supply chain demand model is based. This is followed by a discussion on the hypotheses pertaining to supply chain behavior, and a compendium of the results from the computational experiments. Each of the experiments is evaluated relative to the propositions posed in (Wu and Meixell, 1998). We conclude from the study several managerial insights and practical recommendations that may improve supply chain performance. 1 A Solution Method for the Supply Chain Production Model We first describe a particular version of the multi-level, multi-period lot-sizing model to study demand propagation in manufacturing supply chains. This model is a special instance of the general model discussed in (Wu and Meixell, 1998). The