Construction equipment industry is regarded as a mature industry where new technical innovation can rarely be expected and a lot of competitors are involved. Therefore prime competitive priorities in construction equipment industry are low cost and quick delivery. In this market, the fluctuation of market demands is quite frequent and can not be forecasted exactly. Under this situation, inventory or safety stock is inevitable buffer to cope with the change of market situation.
A system dynamic model is applied for understanding how the fluctuation of market demands affect production and inventory in the purchasing management system. Dynamic behavior of the model has been sought through verifying the causality model and reference mode. Sensitivity analysis and policy test has been performed.
A result of this study shows that the leveling production is an important factor in order to stabilize the entire purchasing control system and that the dynamic behavior pattern studied here ought to be recognized by decision makers.
