Improving the supply chain performance: Use of forecasting models versus early order commitments

Abstract

This paper evaluates the impact of forecasting models and early order commitment in a supply chain with one capacitated manufacturer and four retailers under demand uncertainty. Computer simulation models were used to simulate different demand forecasting and inventory replenishment decisions by the retailers as well as production decisions by the manufacturer under a variety of demand patterns and capacity tightness scenarios. This study found that early order commitments significantly affected the total costs and service levels, to various degrees, for the manufacturer and the retailers, suggesting that the benefits of early order commitment could be influenced by a combination of forecasting models, demand patterns and capacity tightness.