Manufacturer performance modelling using system dynamics approach

Abstract

Each manufacturing industry has tried to improve their profits through effective operational strategies and policies. Hence, continuous performance measurement is required due to the abnormal variations in the customer demand and production processes. Due to the growing interest in manufacturer performance measurement in dynamic nature, we have used the system dynamics methodology to evaluate the production performance and also to presents the effect of decision variables on the operational metrics. In a supply chain, most of the value addition process has taken place at the manufacturer level, so the manufacturer’s operational policies and decision strategies have a significant impact on the supply chain performance. Hence, the objective of the paper is to model the dynamic performance of the manufacturing supply chain under a steady-state and obtain a true reflection of its behaviour. Moreover, this model has shown the dynamic performance of the system under the initial conditions considered and evaluated it with the obtained results at the various scenarios which are commonly addressed in real-life operational conditions. Eventually, this paper has shown the effect of the manufacturer's decision variables such as safety stock and cycle time on the operational metrics like work in process, finished goods inventory, backorders, and profits.