APPLICATION OF A SYSTEM DYNAMICS MODEL TO IMPROVE THE PERFORMANCE OF MAKE-TO-ORDER PRODUCTION

• Yi-Lun Elaine Ho Sing Wu University

DOI:

https://doi.org/10.7166/26-2-787

Keywords:

make-to-order, System Dynamics, replenishment, performance improvement.

Abstract

This study provides a system dynamics (SD) model of make-to-order (MTO) production and discusses the key factors of production improvement. The proposed system can be divided into three subsystems: income/cost, order/production, and human resources (HR). The time delay between customer demand, production demand, order quantity, material demand, and inventory is considered in a practical application. In addition, this paper considers how the cycle time is affected by the total input of HR; how unit transportation cost is influenced by the delivery quantity; and how unit penalty (shortage) cost is affected by the amount of shortage. The production capacity, yield, and holding cost needed to satisfy practical demands are all considered. A simulation approach to MTO production for meeting contract requests is presented in this study. Simulation results reveal that the amount of shortage will be the most important factor affecting the policy for the replenishment of material. Although the rise in production capacity leads to a reduced amount of shortage, it does not play a significant role. A sensitivity analysis of the replenishment of material policy is conducted to find out the best suggested policy. The SD model is also shown to quickly simulate changes in system behaviour, which allows an organisation enough time to respond to and conquer any unpredictable situation that might occur.