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An Operational Application of System Dynamics in the Automotive Industry: Inventory Management at BMW

The application of system dynamics modelling in strategic decision-making and the analysis of market scenarios has been widely recognized. However, little attention has been placed on the application of system dynamics models to support operational decision-making.

This paper presents a simple system dynamics model developed for BMW’s production planning department to support decision making on production schedule, -mix and inventory management on a day-to-day basis.

As we will show in the paper, production planning in car manufacturing is characterized by high complexity and uncertainty due to various parameters influencing the inventory levels and production progress.

In this situation a static monitoring of inventory levels is not sufficient for production planning, since the inventory levels are critical for  the car production process to work properly. Therefore a dynamic monitoring tool is needed.

Based on a relatively simple structure, an easy-to-use interface, and online data-exchange, the developed system dynamics model described in this paper offers a tool to assess the risk associated with different inventory policies and improves the management of inventories and production schedules.

The paper concludes with the experience made during the last 1½ years, in which the model has been used by the production planners at BMW’s production plant in Regensburg.
Source: The System Dynamics Society
Author: Andreas Listl | Ingo Notzon

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