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This paper studies the problem of output agreement in networks of nonlineardynamical systems under time-varying disturbances. Necessary and sufficientconditions for output agreement are derived for the class of incrementallypassive systems. Following this, it is shown that the optimal distributionproblem in dynamic inventory systems with time-varying supply and demand can becast as a special version of the output agreement problem. We show inparticular that the time-varying optimal distribution problem can be solved byapplying an internal model controller to the dual variables of a certain convexnetwork optimization problem.

Internal models for nonlinear output agreement and optimal flow control