Analyzing the Product Substitution Approach in a Two-Stage Supply Chain

Product substitution refers to the use of product configuration Y to satisfy the demand for product configuration X when there is a stock-out for product configuration X in a multi-product configuration environment. Both product configuration X and Y are from the same product family where product configuration Y is higher in comparison to X. In this paper, a simulation model is developed for a two-stage supply chain for a multi-product configuration environment to study the impact of product substitution on supply chain performance along different dimensions and to determine the suitability of product substitution approach in a specific supply chain environment. Regression analysis is also carried out to establish the relationship between output parameters (i.e., total profit and product fill rate) and various input parameters