System Dynamics Model to Understand Demand Conditioning Dynamics in Supply Chains

Demand Conditioning is one of the methods used to address imbalances between supply and demand in supply chains. This requires the manufacturer to adjust the demand plan to respond to supply issues. The supply chain has several sources of delays and uncertainties such as lead times at different stages, forecast error, supply yield variability etc. that could potentially trigger or influence the conditioning process. In this paper, we examine dynamical effects in the conditioning process to study potential instabilities. We developed a Systems Dynamics model of a PC manufacturing supply chain to examine instabilities in the supply chain. This model provides insight on supply chain risks and error propagation due to unsynchronized execution. We also use the model to study the effect of different countermeasures to stabilize the supply chain.