Life cycle profit - reducing supply risks by integrated demand management

Gerald Reiner, Martin Natter, Wenzel Drechsler

Publication: Scientific journalJournal articlepeer-review


Technology advances and competitive pressure have shortened the life cycles for many products and drastically increased the penalty of holding obsolete finished goods inventories. Standard planning methods lead to high forecasting errors and – as a consequence – to high safety inventories. Furthermore, these traditional inventory models typically assume that demand is stationary. However, in industries with very short product life cycles like the mobile phone industry the assumption of stationary demand is not appropriate. Since, an appropriate service level is of major interest we propose a new model with stochastic elements (demand) in order to investigate optimal service levels. In particular, we calibrate a system dynamics model for the integrated analysis of alternative pricing strategies and their effects on the service level. Hence, we can show how our model supports the identification of the best service level in terms of customer satisfaction and life cycle profit. Furthermore, we introduce a new approach in system dynamics modelling to ensure external validity of our model.
Original languageEnglish
Pages (from-to)653 - 664
JournalTechnology Analysis & Strategic Management
Issue number5
Publication statusPublished - 2009

Austrian Classification of Fields of Science and Technology (ÖFOS)

  • 102009 Computer simulation
  • 502052 Business administration
  • 502012 Industrial management
  • 211
  • 502017 Logistics
  • 502032 Quality management

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