Supply Chain Management with Demand Substitution

Demand substitution is a very common practice, but due to its inherent difficulty of mathematical modeling, little has been done on the impact of the demand substitution to the supply chain network.This dissertation studied the impact of demand substitution to a supply chain network.

One of the most important measurements of supply chain network, Bullwhip effect, is studied under the demand substitution case. To help understand the influence, a new qualitative measurement of the bullwhip effect is proposed to better capture the essence of the uncertainty associated with supply chain networks. Then a mathematical model is formulated to investigate the bullwhip effect of two products substitution case.

Due to the difficulty of the mathematical modeling of the demand substitution process, “Metamodel” methodology is applied to study the relationship among different aspects of the supply chain network.

Finally, a network based algorithm is proposed to represented the demand substitution process. Graphical Evaluation And Review Technique (GERT) is used to solve the network model. The results demonstrated the effectiveness of the network model to approximate the demand substitution problem. In the end, the dissertation concludes with a summary of the contributions to the state of the art.