Inventory Behavior Analysis through Scenario-Based System Dynamics Simulation

Inventory is a system with ordering delays and feedback that can trigger stock oscillation, shortages, and excess cost. This study analyzes the dynamic behavior of a single-echelon inventory system and compares four policy scenarios using System Dynamics. The model is built through a causal loop diagram and a stock and flow diagram, then simulated for 104 weeks against a 50% demand step with illustrative parameters and deterministic demand. The model was verified through equilibrium, mass-balance, extreme-condition, and time-step convergence tests, while validation against real data has not been done. In the baseline, the demand step induces damped oscillation with a period of about 17.8 weeks, a shortage lasting 8.8 weeks, and a peak order increase 2.47 times the demand increase. Shortening the lead time reduces cumulative backlog by 87.7%; supply-line correction damps order amplification to 1.63; three weeks of safety stock eliminates shortages but raises total cost by 174.2%; and combining lead-time shortening with supply-line correction gives the lowest cost (down 12.6%) at a shortage-to-holding cost ratio of 5:1. Under these illustrative parameters, improving the feedback structure damps oscillation and reduces cost more than holding more stock.