Investigating the effect of product variants, and demand distributions on the optimal demand supply network setup

Abstract

In today's marketplace, consumers are looking for product variety and low prices. In this paper, we investigate how product variation and demand distributions affect demand supply network optimality in a real-life based setting. The research methodology was based on a novel Petri net formulation, which employs reachability analysis to demand supply network optimisation. We found that in our case study localised final assembly is justified with one or two product variants, but a centralised production should be favoured with three or more product variants. We also noted the sensitivity of this result to transport cost/inventory carrying cost tradeoff.

Keywords:

• Demand supply network analysis
• variant cost impact
• modelling
• Petri nets