System dynamics simulation model for inventory optimisation of manufacturers: a case study in electrical industry

Abstract

System Dynamics (SD) is an approach to understand the behaviour of complex systems over the time. Although SD has been applied in different areas, its integration with fuzzy inventory optimisation is less investigated. In addition, customers’ demand fluctuation is a significant factor in inventory optimisation which is not studied in previous literature. Therefore, this study applies SD to consider customers’ demand fluctuation and improve the inventory level of companies. Particularly, a SD model is constructed in iThink software to represent the inventory level of the companies. Following, the Stock and Flow Diagrams (SFDs) are applied to represent the structure of the system. Next, three variables of demand variation, demand average and the highest demand are modelled in Matlab Simulink fuzzy controller to optimise the inventory. According to the obtained results, the inventory level of the considered case study is optimised by applying the developed model. Finally, obtained results are compared with the current inventory level of the company and some managerial implications are suggested.