Modelling the dynamics of inventory and backlog management in servitized supply chains: The case of custom industrial manufacturing firms

• Main Author: Dizon, Liezel Bianca C.
• Format: text
• Language: English
• Published: Animo Repository 2018
• Subjects: Business logistics; Operations Research, Systems Engineering and Industrial Engineering
• Online Access: https://animorepository.dlsu.edu.ph/etd_masteral/6326; https://animorepository.dlsu.edu.ph/context/etd_masteral/article/13395/viewcontent/Dizon__2018__MS___Modelling_the_dynamics_of_inventory_and_backlog_management_in_servitized_supply_chains2.pdf
• Institution: De La Salle University

Recently, the traditional boundaries between products and services have become increasingly blurred, wherein services are progressively accounting for greater share of revenues and profits of manufacturing firms. This phenomenon is referred to as servitization, where traditional manufacturing firms, especially those in high-value capital equipment industries, are actively pursuing service growth strategies. An important challenge for managers in this type of supply chain is to integrate the delivery of the products and services such that resources and knowledge are used effectively and efficiently. In the absence of a study that simultaneously considered the various services rendered at different stages of the product life of a servitized manufacturing firm, this study developed a system dynamics simulation model that incorporates the product and service operations of a custom industrial manufacturing firm and the response of the customers in the firm’s service level to analyze the effectiveness of various service capacity and inventory strategies. The system dynamics simulation model was then used to determine the leverage points and important feedbacks that drive the variations of the system variables. The sensitivity analysis revealed that the delays associated with adjusting both production and service capacity and closing the finished parts inventory gap are responsible for the instabilities experienced by the supply chain. From the insights generated in the sensitivity analysis, alternative policies that target the major feedback loops were generated. The policies include incorporating manufacturing and service capacity utilization decisions, and a dynamic safety stock decision. These policies were proven to improve the overall system behavior by significantly attenuating the amplifications, phase lags, and oscillations in all subsystems of the servitized supply chain, while maintaining desirable service levels. The theoretical findings were then translated to managerial implications.