Abstract for: Demand Endogenization of Intermediate Products in Supply Chains through a System-Dynamics-based Modularization Concept

A huge variety of System Dynamics models have been developed to endogenize short-term demand variations in supply chains. The Beer Game, used as a standard System Dynamics introduction in management courses, is co-responsible for having made these models wide-spread and of high-quality. Surprisingly, models that deal with long-term demand development arenít seen that often. Even in the Special Issue on Supply Chain Management (SCM) in the System Dynamics Review 2005, the editorially responsible team of authors summarizes that this issue plagues firms in innovation driven industries and is often ignored in conventional SCM research. In this paper a suggestion of a long-term demand endogenizing framework is provided, helping to close this gap in recent research. The framework is designed to deal with the diffusion processes of innovative intermediate products. Although most product transactions are intermediate product transactions, many diffusion models are apparently designed to deal with the diffusion processes of end products and not with intermediates as evidenced by the structural causality of these models. With this focus on intermediate products also new ground is claimed. Additionally, generic reusable models and guidelines how to apply the concept to a case under study, makes the aim of the paper, helping to optimize production capacity and inventory planning, practically implementable.