Goodwill, inventory penalty, and adaptive supply chain management

Information visibility is generally useful for decision makers distributed across supply chains. Availability of information on inventory levels, price, lead times, demand, etc. can help reduce uncertainties as well as alleviate problems associated with bullwhip effect. A majority of extant literature in this area assume a static supply chain network configuration. While this was sufficient a few decades ago, advances in e-commerce and the ease with which order processing can be performed over the Internet necessitates appropriate dynamic (re)configuration of supply chains over time. Each node in the supply chain is modeled as an actor who makes independent decisions based on information gathered from the next level upstream. A knowledge-based framework is used for dynamic supply chain configuration and to consider the effects of inventory constraints and ‘goodwill,’ as well as their effects on the performance dynamics of supply chains. Preliminary results indicate that neither static nor dynamic configurations are consistently dominant. Scenarios where static configurations perform better than the modeled system are identified.