A decision-support framework for exploring supply chain tradeoffs

Producers of retail products continually need to determine how much of a particular product to produce. The difficulty of judging correctly is compounded when the product has a short production-sales interval and is made primarily for sale during the big Winter Shopping Season (e.g. around Christmas holiday). In an effort to minimize production and distribution costs, decision makers would like to produce as early as possible, but doing so would increase the risk of producing the wrong quantity. Good forecasting mitigates this problem, and the use of agile supply chains allows the firm to produce later in the production-sales interval. Both however add to the cost of production. If the external environment is volatile, then there would be increased uncertainty as to a desirable course of action. This paper presents a simulation-based decision-support framework for exploring the tradeoffs in producing different quantities under a variety of supply chain configurations and alternate forecasting options, given uncertain demand environments. We provide an illustrative example to highlight these tradeoffs.