Group model building and quantitative modeling applied to a supply chain problem
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The spare parts supply chain at heavy equipment distribution company presents two problems: high inventory and order instability. The goal of this thesis is to investigate their causes and inform on possible solutions. The research used group model building as a method to involve the stakeholders in the modeling process and to foster learning and commitment towards implementation of the policies defined. System dynamics simulations are used to understand the behavior of the model built with the group and to test hypotheses about the possible causes of the problems defined. The research concludes that the ordering policy from the company to the supplier, misperceptions of past sales, misperceptions of the inventory on hand, and lack of trust among key actors in the supply chain causes order instability, and leads to higher-than-desired inventory levels. The implications of the research are expressed in the policy recommendations of the project: (a) the sources of information about sales and inventory on hand used in the ordering process to the supplier must be corrected in order to avoid misperceptions at the decision making level, and (b) orders, sales and inventory information must be shared between key actors in the supply chain in order to increase transparency and build trust.