Shyam Sunder Rao, K. Vizaya Kumar, developed a model
for medium size industrial iron foundry where important
issues relating to the demand, inventory, and production rates
are considered and concluded that by maintaining good vendor
relationships helps in reducing the lead time and can improve
the quality of services, customer satisfaction which improves
supply chain efficiency and also concluded how much to keep
as the inventory level. Inventory reductions generated by justin-time
(JIT) and lean manufacturing policies, implemented by
one firm are often offset by increases in inventories held by
suppliers or customers9
.
When a manufacturer moves to JIT materials delivery, its
suppliers must deliver more frequently and with much higher
reliability. To meet these more stringent requirements
suppliers often carry additional inventory10
.
Orders are processed with JIT (just-in-time) systems in
minimum amounts and with the manufacturing priorities
defined by the delivery date11. This approach, which
emphasizes simple control systems, has brought about changes
to the manufacturing process with shorter cycle times and
improved customer service12
.
Through the philosophy of JIT - materials delivery systems,
the suppliers must deliver material more frequently and with
much higher reliability. To meet their demand, suppliers often
carry additional inventory so that the production is not
affected10. Production comprises ‘made-to-order’ from the
building up of stock. The order rate is based on the
observation of the customer behaviour for a certain period of
time. Amplification behaviour in inventory is usually the result
of increased orders in each stage of the supply chain. The
delays in the customer order to delivery, further add up to the
piling up of the orders13
.
Ashish Agarwal and Ravi Shankar, (2005), developed a
system dynamics model to understand the dynamic behaviour
of customer satisfaction, cost minimization, lead-time
reduction, service level improvement and quality improvement
which plays a major role in improving the performance of
supply chain and also observed that with the improvement rate
for delivery speed, data accuracy, centralized and collaborative
planning, market sensitiveness the behaviour was very slow
initially and later increases. Similarly the value of inhibitors
such as lack of trust, uncertainty and resistance to change is
quite high in the beginning but gradually decreases and
concluded that as the impact of inhibitors reduces the
influence of enablers on SP Index gradually improves
14
.
Increase in supply chain performance Index indicates the
performance improvement of the supply chain. According to