Systems approach to modelling cost and value dynamics in manufacturing enterprises

Operations and activities in manufacturing enterprises (MEs) are undergoing frequent changes as a result of external and internal factors which actively impact on the structures, processes and work patterns of most MEs. These changes induce complexities and dynamics in the survival of most MEs. As a result of the changes, cost and value generation are also affected. To remain competitive, MEs have to continuously and flexibly adjust through the redesign and organisation of their processes and resource elements with the aim to improve key performance indicators including cost and values. This is however not simple to achieve because of the inherent and ongoing dynamics experienced by MEs. This paper shows how system dynamics modelling techniques, in the form of causal loop and iThink simulation, can be coherently used to capture salient factors which induce dynamics in MEs. The integrated modelling technique was further used to show how dynamic impacts of MEs on cost and value generation can be conveniently modelled and analysed to support decision making related to competitiveness and profitability of a case study furniture manufacturing company.

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