Managing production level in new product diffusion: an agent-based simulation approach

Abstract

Managing production level after the launch of a new product is a challenging problem and is critical to the overall profit of manufacturing firms. The problem involves concepts from different fields including production planning, manufacturing flexibility, forecasting, and marketing. In this paper, the gaps in the existing literature are first illustrated. With the goal of addressing the identified research gaps, agent-based modeling and simulation is employed to analyze the performance of different production planning strategies under various levels of volume flexibility and consumer social network structures. The key distinguishing feature of the developed model is the capability of the manufacturing firm to adjust its production level by forecasting the future demand. The analysis of the simulation outputs yields substantial results by challenging some intuitive and traditional understandings of manufacturing systems. The paper also provides a discussion on managerial implications of the results in order to provide the managers with guidelines on the implementation of the model in real-world diffusion environments.