Coordinating supply and demand applied Bass diffusion modelling

Abstract

Demand management concerns what customers need and want, while supply management focuses on producing products/services to fulfill demand. It is challenging in coordinating demand and supply from both sides. Multi-method modeling, which is an interesting combination between system dynamics and agent-based models, is adapted to address this issue through the Bass diffusion model to replicate a non-competitive supply chain, including a retailer, a wholesaler, and a factory in this study. The research findings show that there is a bullwhip effect on the supply chain due to sudden changes in demand impacted by marketing efforts, namely advertising, words of mouth, and electronic words of mouth. It is recommended that in the process of sales and operations planning, businesses should implement, measure, and estimate marketing effectiveness corresponding with supply capabilities. Additionally, through the study, the strengths and weaknesses of the multi-method simulation in facilitating business research reflect through multiple scenarios running with cost and time efficiency, as well as the validity of the study findings associated with modelers’ decisions on the model’s level of simplicity and elaboration.