Relating Demand Behavior and Production Policies in the Manufacturing Supply Chain

Production decisions in a manufacturing supply chain are no longer driven by manual systems based on instinct and experience. They are regulated interactions between analysts, production managers and their collective manipulation of policies within the production information system. This paper studies the demand behavior in manufacturing supply chains and its relationships to the logic of production information systems pertaining to order batching, multiple schedule releases, bill of material processing, and resource leveling. The analysis helps us to understand the possible causes of demand amplification, the dependencies and mutual sensitivities of production decisions over multiple supply tiers, and the possible effects of production lot sizes, product design, and capacity levels. Main results include that multiple schedule releases may be used to stabilize supply chain operations, production batching may amplify demand variations across supply tiers, and that operating close to capacity tends to dampen demand variation downstream. Subject Categorizations: Production/Scheduling, planning: manufacturing supply chain operations Manufacturing, performance/productivity: demand behavior analysis