The impact of the net present value on the assessment of the dynamic performance of e-commerce enabled supply chains

This paper shows the impact of using the net present value (NPV) on parameter selection in the ordering policy of a production planning and control system. Using a well understood and documented systems dynamics model of a supply chain, the NPV is used as an objective function to determine the discounted future variance costs resulting from the model's dynamics. The NPV of the Variance (NPVv) is defined and applied to the model under three scenarios; traditional, electronic-point-of-sales enabled and vendor managed inventory. It is shown that the resulting management implications are sensitive to the selection of the NPVv parameters.