Abstract:
The primary objectives of any manufacturing company are to maximize production
capacity (volume) to meet the average customer demand and gain profit (Eshetie, 2018).
Uncertainty increases complexity in manufacturing systems, which is considered a major
difficulty in many sectors. Uncertainty of demand increases production process complexity
and number of operations in the system. The main objective of this study is to analyze and
improve manufacturing system performance using system dynamics modeling techniques
in the case of Amhara Pipe Factory (APF). On these premises, the study is motivated to
investigate the number of dynamic factors that affect the loss of performance in APF and
their effect on performance.
As a result, this thesis tries to assess critical factors that affect the performance of a firm
using IBM SPSS statistics 20 and develop system dynamics simulation model to analyze
three different scenarios that can be used to assess the effect of each factor on the
performance of the company using Vensim software. The study was conducted using an
interview with structural questionnaire having a 71-sample size, and direct observation by
using purposive sampling and simple random sampling techniques.
The results of correlation and regression analysis demonstrate that human factors, process
factors, and product and service factors all significantly affect Amhara Pipe Factory's
overall performance. Using these factors as a baseline, a system dynamics model is
constructed.
The findings of the developed system dynamics model are: 1) when an average customer
demand increase by 50%, the company improves their performance by 0.457% from their
actual performance. 2) By reducing downtime and cycle time by 50% on average, the
company can improve its performance by 2.257% over its current performance. 3) By
increasing the value of the training and experience factor from the human factor sub module
by 50%, the company improves its performance by 26.6% compared to the company's
actual performance (71.843%). Depending on the result, the researcher concludes that the
third scenario is the best to be implemented and gain performance improvement. So, the
study implies that working on improvement of employee performance has a great impact
on the overall performance of manufacturing industry.
Key words: system dynamic modeling, performance, manufacturing system.