Improving the Efficiency of Manufacturing Supply Chain Using System Dynamic Simulation

Abstract

Supply chain is a network of different business units which focuses on integration among all units in order to produce and distribute end products to the customer. Nowadays, due to increased uncertainty in customer demand, it is necessary to be sure that the supply chain networks operate as efficient as possible in order to satisfy the customer demand at the lowest cost. Enhancing the efficiency of the supply chain necessitates the interaction between different members of the supply chain which can be achieved through supply chain management. Hence, the development of modeling approach in order to understand and analyze the dynamic behavior of supply chains is brought into consideration. This paper proposes a system dynamic simulation model for manufacturing supply chain. System dynamic is used as suitable method to understand and analyze the interactions of various components via feedback structure. The objective of this paper is to simulate the manufacturing supply chain of an electronic manufacturing company in Malaysia. The simulation model is used to study the system’s behavior (in terms of production rate, inventory levels, and backlog orders) under two different operational conditions (named as fixed and varied capacity policies) and compare their efficiency in terms of total cost. The analysis shows that the proposed operational condition, which is varied capacity policy, improves the system efficiency in terms of cost.