Modeling and simulating the multi-generation product sales, production and inventory system within the context of quality upgrades

Abstract

The rapid development of science and technology has led to an increasing number of high-tech enterprises offering new products through successive generations of product upgrades. This trend presents a new challenge for the sustainable operations of enterprises. Based on the Norton-Bass model, this study begins by constructing a multi-generation product diffusion model within a single enterprise in the context of a monopoly under the quality upgrade scenario. Subsequently, a supply model is established based on this foundation, and these two models are seamlessly integrated using product sales volume as an interface, culminating in a comprehensive sales-supply system. This study analyzes the effects of new-product pricing, quality levels, initial stock, and production capacity on the performance of this system. The system dynamics (SD) method was used to simulate and solve the system in the decentralized and centralized decision-making modes, and the two decision-making modes were compared and analyzed. The research reveals several key findings. i) Comprehensive decision optimization yields enhanced profitability through joint optimization calculation of the multi-generation product diffusion system and the supply adjustment system. ii) consumer price sensitivity significantly affects product quality upgrades and profits. A negative correlation exists between consumer price sensitivity and both factors. The upgrades of product quality should be carefully traded off with consideration of pricing and quality costs. iii) Maximizing profits by maintaining a certain order level of backlog or stock shortage is beneficial for overall enterprise profitability. Additionally, optimal production capacity has been identified as a crucial element in efficient operational inventory management. This study expands the multi-generation product diffusion operational theory and provides valuable theoretical support and decision-making foundations for the sustainable management of enterprises.