may result in alternating periods of high and low stocks with the possibility of obsolescence in the stock out. Alternatively it may manifest as periods of capacity expansion and contraction, with the possibility of increased cost due to over capacity and lost market opportunities through capacity cut-backs." "Much of the pioneering work into aspects of supply chain dynamics was undertaken by Forrester in the late 1950s using a simple but representative simulation model of a production distribution supply chain: Figure 1Based on a series of simulation experiments, Forrester revealed a number of important behavioral features of a supply chain:1) Demand in the marketplace becomes delayed and distorted moving upstream through a supply chain At any one point in time, processes in various companies in the chain may be moving in different directions to each other and the market, Figure 2 Supply chain designs tend to "amplify" marketplace variations. The magnitude of the variations in orders placed on the factory is greater than the variation in marketplace demand, Figure 2. Supply chain designs can introduce 'periodicities', which can be mis-interpreted as a consequence of seasonal variations in the marketplace, rather than a property of the supply chain dynamic.2) Attempts to reduce poor supply chain dynamic behavior can exacerbate the problem. Counterintuitive behavior occurs because the causes of the behavior are obscured from the decision makers in the chain." Some industries, e.g. the semi-conductor industry, exhibit almost characteristic surplus-shortage behavior, as shown in Figure 2. Figure 2 backs up a remark from the President of Intel made approximately 10 years ago, "the capacity in my industry has been in balance with demand for 35minutes during the past 10 years." Clearly, there was some way to go back then in overcoming the problems of supply chain dynamics. Much progress has been made since his remark back in 19...
