A System Dynamic Simulation Model

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A SYSTEM DYNAMIC SIMULATION MODEL

IN

THE SYSTEM SUPPORT ORGANIZATION

OF A SPEEDY PRINTING COMPANY

(ABC/CND/POWERSIM PROJECT)

A Thesis/Project Submitted in Partial Fulfillment

For the Degree of Master of Science in

Systems Management College of Notre Dame

By

Wei-Chen Chung

March 6TH, 1999


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A System Dynamic Simulation Model in the System Support Organization of a Speedy

Printing Company

(CND/ABC/Powersim Project)

Wei-Chen Chung

Abstract

The Capstone Project is based on a group model building project. Group members came from aprinting/coping company (ABC), the college of Notre Dame, and Powersim, Incorporated. Thegroup analyzed a speedy printing company (ABC Printing Company) using system dynamicmodeling. In this report, I will discuss the methods and solutions that were developed by theABC/CND/Powersim project team.

This project focused on sales and production problems of the ABC printing company. The projectteam under the guidance of the Powersim representative used the concept of system thinking andthe skill of systems dynamic modeling to produce a computer simulation. The simulation softwarecan be used to show forecasting curves of the companys profits and sales peoples revenue overthe next five years.

A high-level user interface was designed by this author to create a "user friendly" environment forworking with the simulation. CND students and the ABC printing company owner can now use thesoftware to successfully explore the outcomes of different business scenarios. The simulation anduser interface were evaluated by MSSM students and the owner of the ABC Printing Company.

Introduction

In the real world, structures of an organization have become complex. Therefore, we need tounderstand whole systems of the organization that can help us to make decisions for theorganization. In this project, I will discuss an optimized way to understand an organization. When Itook the Master of Science in Systems Management program, I tried to explore methodologies thatcould help me to understand systems management. When I took my second course, I made aproject about air traffic controlling using the concept of system dynamics which was a very usefulorganization learning concept for me. I was an air traffic controller during my military service inTaiwan. I saw many air near-collision events that were caused by poor management. If the concept

of system dynamics can be applied in air traffic management, many high-risk events would beavoided. Of course, system dynamics can support different business decisions.

I began participation in the "ABC/CND/Powersim" group project with Dr. Sylvia Shafto beginningin the spring, 1998. The project needed to use the concept of system dynamics to analyze thebusiness decisions of ABC Printing Company. In this group project, I understood more ideas aboutsystem dynamics and learned the skill of using the system simulation software.


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The purpose of the ABC/CND/Powersim project is to develop solutions that support ABC PrintingCompany using system dynamics model building. I will use the following steps to provide mycapstone project:

I. Project group background, meetings, and workshops

II. Project problemsIII. Project model-building process

I. Project group background, meetings, and workshops

The ABC/CND/Powersim project team includes three groups: the College of Notre Dame (CND),ABC printing company, and Powersim, Incorporated. The College of Notre Dame was partneringwith ABC printing company and Powersim Corporation to develop a computer modelingsimulation based on system dynamics to be used by CND's MBA and MSSM graduate programs.

The development of this real-world tool allows CND students to simulate outcomes of businessscenarios. By moving to implement such a technology with the graduate program, CND can furthersupport high technology-based educational tools in its program. ABC/CND/Powersim project teamused two meetings to get the project development started. I also attended a two-day workshop tounderstand Powersim simulation software.

The first meeting (August 13th, 1998)

In the first meeting of ABC/CND/Powersim, we developed our project criteria:

1. Model is to be used in educating students in CND's MBA and MSSM courses

2. Model is to be used in limited capacity by ABC Printing company3. Model must be dynamic, including circumstances played out over time

According to the project criteria, we decided on the project concepts and problem areas to focus onfor the ABC/CND/Powersim project:

1. Staffing -- support the company through its workforce/staffing decisions. This mayinclude analysis regarding sales per employee, retention, motivation and turnover.We may also develop the idea of sales force vs. production along with cross-functional work teams.

2. Outsourcing -- enable the company to maximize its potential through outsourcing.

The second meeting (August 28th, 1998)

In the second meeting of ABC/CND/Powersim, we studied the framing question: What are the keyissues facing ABC Printing company in managing sales and production staff over the next 5 years?The owner of the ABC Printing Company supplied the group with an excellent set of past five-yearbusiness data for the company. This provided the real-word basis for the model and simulation.


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We figured out the significant issues (Appendix A). According to the issues for ABC Company,we have developed the model for the company. In this paper, I will describe the details of themodel structure.

Powersim Workshop (September 14 & 15th at Crown Plaza, S.F.)

ABC/CND/Powersim project uses Powersim to develop the system dynamic simulation model. Forthis reason, I attended Powersim "Introduction to Business Modeling and Simulation withPowersim Constructor" workshop on September 14 and 15th at Crown Plaza, San Francisco. Thefollowing are the features of the workshop.

1. Focus on business problems quickly using simulation tools2. Analyze and communicate solutions and strategies more effectively using models3. Analyze possible solutions by constructing a model and experimenting with some

components: inventory control, product life cycle planning, capacity planning, humanresource and finance.

In the workshop, I learned the fundamentals of building problem-solving models and simulations.With the help of presentations, hands-on workshops, a case study and a step-by-step developmentprocess, I developed business models and simulations that could solve real problems. After theworkshop, I understood Powersim. Powersim is a simulation software, and it is similar to iThinkand Versim. Powersim is a Windows based software package for creating system dynamics modelsand custom-designed business simulators. Powersim can be used as the basis for creatingmanagement flight simulators which permit interactive experimentation with such issues ascorporate strategy, operations, marketing, competitive analysis, and decision-making.

Powersim can be used to create simulations across a wide spectrum of industries and business

areas, such as:

1. Strategic planning2. Resource management3. Crisis planning and management, and process reengineering.

II. Project problems

The ABC/CND/Powersim project needs to solve sales and production problems. There are threemain problems: "Strengths", "Weaknesses", and "Issues facing companys business future". In"Strengths", the project needs to identify the companys acquisitions and growth. The results will

give the decision-maker information to make decisions and take actions easily. In "Weaknesses",the project needs to recognize the companys problems. The "weaknesses" questions include "highlabor cost" and "problems with staff balance department by department". In "Issues facingcompanys business future", there are three challenges that need to be faced.

1. What will be the companys profit during the next five years?2. Will products of the company become profitable during the next five years?3. How much sales revenue will be received during next five years?


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The final solutions would focus on "Sales revenue", "Profit", and "Profitability" for ABC PrintingCompany. In the next part of this paper, I will analyze the processes that were used to develop theproject by the ABC/CND/Powersim project group.

III. Project model-building process

"Group model-building is an approach which involves the client consensus and createscommitment with the outcomes" (Vennix, 1996. p.110). I will use the following stages to providethe model-building process of ABC/CND/Poersim project:

1. Problem identification and model purpose2. System thinking and System dynamics3. Model formulation and analysis4. Simulation Application Software for ABC/CND/Powersim5. Evaluation and Feedback

1. Problem identification and model purpose

I think that a group model-builder feels sufficiently confident to start with problem identification.ABC/CND/Powersim developed the problem identification and model purpose in our first meetingon August 13th, 1998. I have described the problem identification and model purpose in the part of"Project group background, sessions, and workshops".

After defining the problem identification during the second meeting, the participants ofABC/CND/Powersim were invited to write down variables in silence. Each variable was written onmagnetic hexagon (Figure 1) and put on a metal board.


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Figure 1. Use of Hexagons in ABC/CND/Powersim to Group Model-building.

There are nine key areas that are included the

ABC/CND/Powersim model.

Management:


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Production:

Industry Changes:


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Production Cycle Time:

Equipment Costs & Purchase Decisions:


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Physical plant & facilities:

Production Staff:


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Sales Force:


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Customers Relations:

2. System thinking and System dynamics

The issue maps (Hexagons) tend to point to the interconnectedness of events. The issue maps aretranslated into a causal loop diagram (Figure 2). This implies the causal relations among elements.The interconnectedness events of ABC printing company are a complex system (Figure 1).


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System dynamics has its fundamentals in the field of systems thinking, and it was founded in 1956by MIT professor Jay Forrester (Appendix C). I learned the concept of systems thinking in theorganizational Theory with Mr. Moran. When I read the book "The Fifth Discipline" (Senge, 1994)that was written by Peter Senge, I had gotten the clear concept about systems thinking. "Systemsthinking is a discipline for seeing the 'structures' that underlie complex situations, and fordiscerning high from low leverage change" (Senge, 1994 p.69). Systems thinking is powerfulbecause it can help people to see their own mental models and how those models color theirperception of the real world.

The situations of the whole system in ABC Company are changing over time, and the system has a

dynamic behavior that is a consequence of its structure. We have talked of the system elements andtheir interconnections.

Senge, talks about two types of complexity. They are detail complexity and dynamic complexity.Detail complexity is associated with systems that have many component parts. Dynamiccomplexity is associated with systems that have cause and effect separated by time and space.Dynamic complexity determines system's behavior over time.


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I learned the concept of systems dynamics in my second course of MSSM, Deterministic Modelsin Decision Making with Dr. Sylvia Shafto. I am very interested in system dynamics. I think themain concept of systems dynamics is to model system structure and behavior using the principlesof feedback, dynamics and simulation. The following characteristics describe uses of systemdynamics modeling:

1. Search for useful solutions for real world problems.

2. Use computer simulation models to improve and understand such systems.

3. Base the simulation models on mental models,

qualitative knowledge and numerical information.

1. Seek improved methods to translate simulation

results into actual implementation.

According to Forrester, system dynamics is a theory of the behavior and structure of complexsystems. The structure of system dynamics has four hierarchical levels:

1. the closed boundary2. the feedback loop as the basic system component3. levels and rates4. goals, observed conditions, discrepancy between goals and observed conditions,

and desired action.

3. Model formulation and analysis

The basic ABC Printing Company model was developed in a group modeling session. ThePowersim representative led the group through the process of specifying the elements of the modeland the algebraic relations. The structure of ABC/CND/Powersim model is a very complexorganization. I use a mathematical method to evaluate the system dynamics of this model. I includethe whole ABC/CND/Powersim model that is a mathematical equation (Appendix E). It is acombination of many differential equations. The structure of the model includes three mainsections, and they are "Production", "Sales", and "Equipment". Powersim's system dynamicsimulation software shows the solutions of the structure.

I compare the equations, flow-stock diagram (Appendix D) and causal loop (Appendix C) diagramin the following.

"Production" section

Flow-stock diagram:


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Figure 3. flow-stock diagram of "PoductionStaff".

Equation:

ProductionStaff = -(ProductionStaffAttrition)dt

+(ProductionStaffHires)dt

ProductionStaffAttrition = ProductionStaff *ProductionStaffAttritionRate

ProductionStaffHires = MAX(0,(DesiredWorkforce-ProductionStaff+(ProductionStaffAttrition*TimeToHireProductionStaff))/(TimeToHireProductionStaff+TimeToMakeStaffingDecisions))

Causal loop diagram:

Figure 4. causal loop diagram of "PoductionStaff".

The structure is a "Shifting the Burden" archetype (Senge, 1994). A Shifting the Burden structureis composed of two balancing loops and a reinforcing loop. Both structures end up moving thesystem in a direction other than the one desired. The graph shows the effect on Production Staff ofthis structure in the model is:


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Figure 5. Curves of "PoductionStaff".

This structure also affects two results "TotalProductionStaff" and "ProductionStaffCosta". Theflow-stock diagram and equation of "TotalProductionStaff" is:

Figure 6. Flow-stock diagram of "TotalProductionStaff".

Equation:

TotalProductionStaff = ARRSUM(ProductionStaff)

The ARRSUM function computes the sum of the value of the elements in an array("ProductionStaff").

The result of the curve for "TotalProductionStaff" is (Figure 7):


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Figure 7. The curve of "TotalProductionStaff"

The flow-stock diagram (Figure 8)and equation of "ProductionStaffCosta" is:

Figure 8. The flow-stock of " ProductionStaffCosta"

ProductionStaffCosts = ProductionStaff(a)*(AvgProductionSalary(a)+ProductionTrainingCosts)

where a=ProductionGroups

The result of the curve for " ProductionStaffCosts " (Figure 9) is:


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Figure 9. Curve for "ProductionStaffCosts"

"Sales" section:

Flow-stock diagram (Figure 10):

Figure 10.

The flow-stock diagram of "Sales" section

The structure is also a "Shifting the Burden" archetype.


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Equation:

NumberOfSalesPeople = -dt*SalesPeopleAttrition

+dt*SalesHires

SalesPeopleAttrition = NumberOfSalesPeople*SalesforceAttritionRate

SalesHires = (DesiredSalesForce-NumberOfSalesPeople +SalesPeopleAttrition*TimeToHireSalesPeople))/TimeToHireSalesPeople

Causal loop diagram (Figure 11):

Figure 11. The causal loop diagram of "Sales"

The result of the curve for " NumberOfSalePeople "

(Figure12) is:

Figure 12. The curve of "NumberOfSalePeople

The output of this structure affects two results "SalesForceCosts" and "TotalSalesForceInvoices",and those equations reference Appendix E. Their curves are figure 13:


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Figure 13. The curves of "SalesForceCosts" and "TotalSalesForceInvoices"

"Equipment" section:

Flow-Stock Diagram:

Figure 14. The flow-stock diagram of "Equipment" section

There are two important equations in "Equipment" section, and they are "FacilitiesSize" and"EquipmentCapacity". "FacilitiesSize" is a "Reinforcing" structure, and "EquipmentCapacity" is a"Shifting the Burden" archetype.

Equation:


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(1) FacilitiesSize = +dt*ChangeInFacilitiesSize

FacilitiesSize = Facilities size initial is 2500

square feet.

(2) EquipmentCapacity = NeededCapacity*2

EquipmentCapacity = -dt*CapacityDepreciation +dt*NewCapacity

EquipmentCapacity = 128,000 copies per eight hour

day for four machines operating 50 weeks per day

time five days per week.

Causal Loop Diagram:

Figure 15. The causal loop diagram of "Equipment" section

The curve of "FacilitiesSize" is:


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Figure 16. The curve of " FacilitiesSize"

The value of "FacilitiesSize" is keeping 2,500 square feet.

The curve of "EquipmentCapacity" is:

Figure 17. The curve of "EquipmentCapacity"

Equipment costs "EquipmentCosts" is an output value that affects the profits and profitability inwhole model.

The equation of "EquipmentCosts" is:

EquipmentCosts = InitialEquipmentCosts/

INIT(EquipmentCapacity)*

EquipmentCapacity

The curve of "EquipmentCosts" is:


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Figure 18. The curve of "EquipmentCosts"

These three sections ("Production", "Sales" and "Equipment") are major key elements of themodel. Sales revenue, profitability, and profits and solutions that ABC/CND/Powersim project

group wants to get. I will describe the flow-stock diagrams, the equations, the causal loopdiagrams, and the curves of their solution in the following.

Flow-stock diagrams:

Figure 19. The flow-stock diagram of "SalesRevenue", "Profits", and "Profitability"

The equations:

SalesRevenue = AvgInvoice * TotalInvoices

Profits = SalesRevenue - TotalCosts

Profitability = Profits / SalesRevenue


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The causal loop diagram:

Figure 20. The causal loop diagram of "SalesRevenue", "Profits", and "Profitability"

The curves of "SalesRevenue", "Profits", and "Profitability":

Figure 21. The curves of "SalesRevenue", "Profits", and "Profitability"

If the growth rate of "SalesRevenue" is greater than the growth rate of "Profits", "Profitability"should decline. The curves of these components are the solutions that we want to get.

4. Simulation Application Software for ABC/CND/Powersim

The Powersim simulation application software allows the developer to design a "friendly"graphical user interface (GUI). This is a program interface that can be easily handled by users. I

will use the concepts of the two MSSM courses Decision Support System, and Person MachineFactors to provide the application software.

Decision Support System

The Powersim application software supports decision-makers of ABC printing company to maketheir decisions, and the application software is a very successful tool for developing a decisionsupport system.


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According to the generic framework of decision support system, a decision support system (DSS)can be defined in terms of four basic aspects:

1. A language system (LS)2. A presentation system (PS)

3. A knowledge system (KS)4. A problem-processing system (PPS) (p. 172 Holsapple, 1996)

ABC/CND/Powersim simulation application software is a simulation tool for ABC printingcompany that can forecast the company sales revenue, profits, and commercial profitability for thenext five years. The structure of the simulation application software is shown in the following:

Figure 22. The structure of ABC/CNS/Powersim DSS

ABC/CND/Powersim is a Rule-Oriented DSS.

1. LS: data input2. PS: Advice solution

(forecasting curves, time table)

3. KS: Flow-stock diagram (system dynamics language)4. PPS: System dynamics model

Structuredness: This application software is for multiple use.

Input: User can define data entry.


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Output: Curves, time table for analysis.

Feedback on output: Help user situation analysis

User Interface Design using Person Machine Factors:

I developed the high-level user interface for the ABC Printing Company simulation. Students andbusiness decision makers cannot interact easily with the modeling version of the simulation. So thePowersim software allows the developer to create a simpler, more easily used interface. ThePowersim simulation application software addresses the concerns of person machine factors fordesigning high-level user interface. It allows the developer to create Windows GUI, and eachfunction is based on object-oriented interface. The menu of the application software interface usesbuttons, and the buttons are three-dimensional. Users can easily select any window they want.Each button is contains text that easily identifies an action. The control is activated when "pressed"

by users.

The ACB/CND/Powersim simulation was constructed using combinations of colors in the softwareinterface that allows users to easily identify highlighted buttons in a window interface. We used theharmonious color combinations in the software interface.

The colors combination:

WindowsBackground colorsForeground colors

Menu White Gray

Help Teal White

Simulation White Non White

Input/Table White Black, Teal, Blue, Magenta

Other colors combinations reference Appendix F.

In the input window of the software, I used slider/bar to control each of the input variables. Userscan benefit from viewing the current value relative to range of all possible values. The output

results are used dynamic curves to display on the simulation window. Decision-makers (users) canquickly get the forecasting information for the next five years. The interfaces of theABC/CND/Powersim simulation are shown the following:

"Menu" and "Help" Windows


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Figure 23. "Menu" and "Help" Windows of ABC/CNS/Powersim software.

"Data Input" Window

Figure 24. "Data Input" Window of ABC/CNS/Powersim software.


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"Simulation" Window

Figure 25. "Simulation" Window of ABC/CNS/Powersim software.

"Table" Window


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Figure 26. "Table" Window of ABC/CNS/Powersim software.

"Causal Loop" Window

Figure 27. "Causal Loop" Window of ABC/CNS/Powersim software.


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"Model" Window

Figure 28. "Model" Window of ABC/CNS/Powersim software.

The simulation not only combines the concepts of

Decision Support Systems and Person Machine Factors, but uses the skill of software engineering.It is not only a case study, but is also a CASE (computer-aided software engineering) tool. Thisproject supports reengineering and enterprise level analysis techniques. Organizationalreengineering is the evaluation and redesign of ABC printing company's business processes, data,and technology. "The goals of reengineering are to achieve dramatic improvements in quality,service, speed, use of capital, and reduced costs" (Conger, 1994, p. 113). The following diagram isthe reengineering target for ABC/CND/Powersim project:


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The main sources of organization are people and information of ABC/CND/Powersim projectgroup. Data from ABC Printing Company is represented in the variables in the model. Technologyis the system dynamics concept and skill.

ABC printing company is a speedy growth organization, and CND uses system managementknowledge to develop a group model with Powersim business simulation software. The product ofABC/CND/Powersim group project is the user-friendly simulation application software.

5. Evaluation and Feedback

When ACB/CND/Powertsim simulation application software was almost done, I demonstrated theapplication software twice in the courses SY269 (Decision Support and Expert Systems) andSY221 (Deterministic Models in Decision-Maker) on February 27th and March 1st, 1999. I got verygood feedback from both two evaluations (ABC/CND/Powersim Evaluation form referenceAppendix G).

The summary of the first evaluation:

1. The software needs more factors/input.2. The model needs to be more realistic. Needs to have more functions (only five

functions) which the user can vary.3. Easy to understand the result.4. The workforce size can not be changed and should be adjustable.


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I got 80% negative feedback asking for improvements. I have updated some problems, and Dr.Sylvia Shafto gave me other opportunity to demonstrate the software. The following showsexample responses on the evaluation of the second model:

1. Software works well.

2. The model is excellent.3. Too complex.4. Good.5. The user interface is easier to use than Vensim.

Conclusion

ABC/CND/Powersim modeling project has applied the concept of system thinking and the skill ofsystem dynamics modeling to develop a group model. The whole project involved group modelbuilding. ABC/CND/Powersim project group identified the problems and model purpose, analyzedthe model formulation, developed simulation application software, and tested the software.

The user interface was improved based on the feedback from demonstrations. Base on thefeedback, the simulation application software has been updated.

System dynamics simulation model is a very useful and interesting concept for organizationlearning, and it combines system thinking and system dynamics. This idea not only supportsbusiness decisions, but also can be used in different areas. I believe system dynamics simulationwill be generally applied in the next century. For this reason, I have chosen the concept for mycapstone project.

Reference

Bailey, Robert W. (1996). Human Performance Engineering: Designing High Quality Professionalfor Computer Products, Application and System. Upper Saddle River, NJ: Prentice-Hall, Inc.

Byrkness, Arne-Helge (1996). Powersim Tutorial 1. Herndon, VA: Powersim Co.

Byrkness, Arne-Helge & Myrtveit,Magne (1996). Learning Dynamic Modeling. Herndon, VA:

Powersim Co.

Conger, Sue (1994). The New Software Engineering. Belmont, CA: International ThomsonPublishing.

Cover. Jennifer M. (1996). Introduction to System Dynamics. Herndon, VA: Powersim Co.


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Galitz, Wilbert O. (1997) Essential Guide to User Interface Design. New York: John Wiley &Sons, Inc.

Hannon, Bruce, & Ruth, Matthias. (1994). Dynamic Modeling. Urbana, IL: Springer-Verlag NewYork, Inc.

Holsapple, C., & Whinston, A. (1996). Decision support systems: A knowledge-based approach.San Francisco, CA: West Publishing Company.

McCleod, Raymond (1998). Management Information Systems. Seventh Edition. New York:Prentice Hall, Inc.

Senge, Peter (1994). The Fifth Discipline: The Art and Practice of the Learning Organization. NewYork: Doubleday.

Vennix, Jac A. M. (1996). Group Building: Facilitating Team Learning Using System Dynamics.

West Sussex, England: John Wiley & Sons Ltd.


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Appendix A

ABC/CND/Powersim

8/28/98 Meeting

The following were the significant issues identified by the group using the hexagons.

Management Number of decision makers

Internal communication efficiency

What is a good profit margin

Speed of decisions

Locus of decision making

Net profit (profitability)

Number of management layers

Production Number of jobs per day

Productivity and capacity utilization

Industry changes Jobs lost to competitors

Competition from large printing companies

Digital technology direction

Production Cycle Time Client response time

Bottleneck is in the prepress

Speed of decision making


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Equipment costs & purchase decisions Equipment cost

General and administrative costs

Fixed costs

Cost of buy versus lease

Sales Force Staff morale

Sales attrition

Costs of outside sales force

Sales goal per employee

Employee incentives

Company sales goal

Number of sales people to be trained

Employee rewards

Physical plant & facilities Location

Sales/square foot

Consolidation of locations

facilities

Rental vs. business

Outsourcing facilities (sales/sq. foot) $200-$300/sq. foot

Acquisition of independent printer company

Customer attractiveness

Growth leads to inefficiencies

Production Staff Quality of new hires

Quality of existing staff


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Number of temporary workers

Employee training/year

Attrition of production employees

Employee incentives

Staff morale

Cost of prepress staff

Payroll cost goal

Cost of outsourcing vs. in-house

Customer relations Specificity of services offered

Breadth of services offered

Pick up and delivery service

Customer satisfaction

Quality of product

Loss of sales

Customer retention/repeat sales

Customer loyalty


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Appendix B

Causal loop diagram


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"Production" section:

"Equipment" section:


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"Sales" section:


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Relation among "Profits", "Profitability" and "SalesRevenue":


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Appendix C


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Germeshausen Professor Emeritus of ManagementSenior Lecturer

University of Nebraska, BS '39, Electrical EngineeringMIT, SM '45, Electrical Engineering

Forrester, who invented random-access magnetic-core memory during the first wave of moderndigital computers, also pioneered the field of system dynamics -- analysis of the behavior ofsystems. He pursues three main interests based on system dynamics: the System DynamicsNational Model, which generates the major observed modes of economic behavior; a newmanagement education based on the inherent, dynamic complexity of all the related parts of acorporation and brings them into a unified system; and system dynamics as a methodology forgiving cohesion, meaning, and motivation to pre-college education.

Jay W. Forrester is Germeshausen Professor Emeritus and Senior Lecturer at the Sloan School ofManagement, Massachusetts Institute of Technology. He began his career as an electrical engineerworking on servomechanisms and large-scale digital computers. While Director of the MIT DigitalComputer Laboratory from 1946 to 1951, he was responsible for the design and construction ofWhirlwind I, one of the first high-speed digital computers.

In 1956, Professor Forrester started the

System Dynamics Groupat the Sloan School and with it, the field of system dynamics. The fivebooks he has written on system dynamics are available through Pegasus Communications inWaltham, Massachusetts.

Along with many writing and speaking commitments, Professor Forrester is currently working onthe National Model Project, a large computer model of the U.S. economy. He is also the director ofthe

System Dynamics in Education Project (SDEP), which is developing ways to use system dynamicsand computer modeling as a foundation for a new kind of kindergarten through 12th gradeeducation. The SDEP project at MIT is writingRoad Maps which is a guide to learning systemdynamics.
http://web.mit.edu/afs/athena.mit.edu/org/s/sysdyn/sd-group/home.htmlhttp://web.mit.edu/afs/athena.mit.edu/org/s/sysdyn/sd-group/home.htmlhttp://www.pegasuscom.com/http://web.mit.edu/afs/athena.mit.edu/org/s/sysdyn/http://www.rondo.com/capstone/Paper/road-maps/home.htmlhttp://www.rondo.com/capstone/Paper/road-maps/home.htmlhttp://www.pegasuscom.com/http://web.mit.edu/afs/athena.mit.edu/org/s/sysdyn/http://www.rondo.com/capstone/Paper/road-maps/home.htmlhttp://web.mit.edu/afs/athena.mit.edu/org/s/sysdyn/sd-group/home.html


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Appendix D


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Appendix E

EquipmentCapacity

init EquipmentCapacity = NeededCapacity*2

flow EquipmentCapacity = -dt*CapacityDepreciation

+dt*NewCapacity

doc EquipmentCapacity = 128,000 copies per eight hour day for four machines

operating 50 weeks per day time five days per week.

FacilitiesSize

init FacilitiesSize = 2500

flow FacilitiesSize = +dt*ChangeInFacilitiesSize

doc FacilitiesSize = Facilities size initial is 2500 square feet.

NumberOfSalesPeople

init NumberOfSalesPeople = 1

flow NumberOfSalesPeople = -dt*SalesPeopleAttrition


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+dt*SalesHires

dim ProductionStaff = (ProductionGroups)

ProductionStaff

init ProductionStaff = InitProductionStaff

flow ProductionStaff = -dt*ProductionStaffAttrition

+dt*ProductionStaffHires

CapacityDepreciation

aux CapacityDepreciation = EquipmentCapacity/CapacityLife

CapacityDepreciation

aux ChangeInFacilitiesSize = (DesiredFacilitiesSize-FacilitiesSize)/TimeToMove

NewCapacity

aux NewCapacity = MAX(0,(DesiredCapacity-EquipmentCapacity +

(CapacityDepreciation*TimeToAddNewCapacity))/TimeToAddNewCapacity)

dim ProductionStaffAttrition = (ProductionGroups)

ProductionStaffAttrition

aux ProductionStaffAttrition = ProductionStaff*ProductionStaffAttritionRate

dim ProductionStaffHires = (ProductionGroups)

ProductionStaffHires

aux ProductionStaffHires = MAX(0,(DesiredWorkforce-ProductionStaff +

(ProductionStaffAttrition*TimeToHireProductionStaff)) /

(TimeToHireProductionStaff+TimeToMakeStaffingDecisions))

SalesHires


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aux SalesHires = (DesiredSalesForce-NumberOfSalesPeople +

(SalesPeopleAttrition*TimeToHireSalesPeople)) / TimeToHireSalesPeople

SalesPeopleAttrition

aux SalesPeopleAttrition = NumberOfSalesPeople*SalesforceAttritionRate

AverageRevenuePerSalesPerson

aux AverageRevenuePerSalesPerson = SalesForceInvoices*AvgInvoice

AvgInvoice

aux AvgInvoice = IF(TIME>1995,120,120)

doc AvgInvoice = Estimate

CapacityUtilization

aux CapacityUtilization = NeededCapacity/EquipmentCapacity

CostOfGoodsSold

aux CostOfGoodsSold = TotalInvoices*VariableCostsPerInvoice

DesiredCapacity

aux DesiredCapacity = NeededCapacity/(1-DowntimeFraction)

DesiredFacilitiesSize

aux DesiredFacilitiesSize = INT(EquipmentCapacity /

INIT(EquipmentCapacity)+0.5)*INIT(FacilitiesSize)

DesiredSalesForce

aux DesiredSalesForce = IncrementalRevenue/INIT(AverageRevenuePerSalesPerson)

dim DesiredWorkforce = (ProductionGroups)

DesiredWorkforce

aux DesiredWorkforce = TotalInvoices/ProductionStaffProductivity


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EffectOfCommisions

aux EffectOfCommisions = GRAPH(AverageRevenuePerSalesPerson

/INIT(AverageRevenuePerSalesPerson) ,0,0.2,

[2,1.94,1.84,1.67,1.41,1,0.74,0.6,0.53,0.5,0.5"Min:0;Max:2;Zoom"])

EffectOfCommisions

aux EffectOfCustomerSatisfactionOnInvoices = EffectOfPriceOnCS *

EffectOfQualityOnCS*EffectOfServiceOnCS

EffectOfMoraleOnQuality

aux EffectOfMoraleOnQuality = DELAYINF(Morale, TIMESTEP, 1,1)

EffectOfPriceOnCS

aux EffectOfPriceOnCS = GRAPH(AvgInvoice/INIT(AvgInvoice),0,0.2,

[4,3.89,3.46,2.35,1.47,1,0.48,0.23,0.14,0.05,0.05"Min:0;Max:4;Zoom"])

EffectOfQualityOnCS

aux EffectOfQualityOnCS = GRAPH(EquipmentQuality*

NormalizedProductionTraining*EffectOfMoraleOnQuality,0,0.2,

[0,0.07,0.24,0.65,0.89,1,1.04,1.07,1.09,1.1,1.1"Min:0;Max:2;Zoom"])

EffectOfServiceOnCS

aux EffectOfServiceOnCS = GRAPH(PerceivedCycleTime/

INIT(PerceivedCycleTime),0,0.2,[4,3.84,3.32,2.25,1.51,1,0.67,0.47,0.36,0.29,

0.21,0.19,0.14,0.14,0.12,0.12,0.12,0.11,0.11,0.07,0.05"Min:0;Max:4;Zoom"])

EffectOfWorkloadOnMorale

aux EffectOfWorkloadOnMorale = GRAPH(ProductionWorkload,0,0.2,


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[0.61,0.61,0.61,0.64,0.75,1,1.11,1.11,0.77,0.65,0.64"Min:0;Max:2;Zoom"])

EquipmentCosts

aux EquipmentCosts = InitialEquipmentCosts/INIT(EquipmentCapacity)*

EquipmentCapacity

doc EquipmentCosts = About $2700 for copiers and $2700 for press per month.

FixedCosts

aux FixedCosts = OtherFixedCosts+EquipmentCosts

doc FixedCosts = This came from P&L Statement from 1995, Colorado.

IncrementalRevenue

aux IncrementalRevenue = RevenueGoal-(NonSalesForceRelatedInvoices*

AvgInvoice)

InitialEquipmentCosts

aux InitialEquipmentCosts = InitialEquipmentUnitCost*Year

doc InitialEquipmentCosts = About $2700 for copiers and $2700 for press per month.

LaborCosts

aux LaborCosts = ARRSUM(ProductionStaffCosts)+SalesForceCosts

doc LaborCosts = This came from P&L Statement from 1995, Colorado.

Morale

aux Morale = EffectOfWorkloadOnMorale

NeededCapacity

aux NeededCapacity = TotalInvoices*CopiesPerInvoice

NonSalesForceRelatedInvoices

aux NonSalesForceRelatedInvoices = 700000/INIT(AvgInvoice)*


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EffectOfCustomerSatisfactionOnInvoices

doc NonSalesForceRelatedInvoices = In 1994, $700,000 in sales occurred without the

help of the sales force.

NormalizedProductionTraining

aux NormalizedProductionTraining = ProductionTrainingCosts/

INIT(ProductionTrainingCosts)

NormalTimeToHireSalesPeople

aux NormalTimeToHireSalesPeople = HireRateForSalesPeople/Year

OtherFixedCosts

aux OtherFixedCosts = 800000*27%-INIT(EquipmentCosts)+

(FacilitiesSize*AnnualCostPerSquareFoot)

PerceivedCycleTime

aux PerceivedCycleTime = DELAYINF(ProductionCycleTime, 1/4,1,NormalCycleTime)

ProductionCycleTime

aux ProductionCycleTime = ((TotalInvoices/TotalProductionStaff)/

(INIT(TotalInvoices)/INIT(TotalProductionStaff)))*NormalCycleTime*Morale

ProductionStaffCosts

dim ProductionStaffCosts = (a=ProductionGroups)

aux ProductionStaffCosts = ProductionStaff(a)*(AvgProductionSalary(a)+ProductionTrainingCosts)

ProductionStaffProductivity

dim ProductionStaffProductivity = (ProductionGroups)

aux ProductionStaffProductivity = INIT(TotalInvoices)/InitProductionStaff*Morale

ProductionWorkload


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aux ProductionWorkload = ((TotalInvoices/TotalProductionStaff)/

(INIT(TotalInvoices)/INIT(TotalProductionStaff)))

doc ProductionWorkload = 1= Normal Work Load

Profitability

aux Profitability = Profits/SalesRevenue

Profits

aux Profits = (SalesRevenue-TotalCosts)

RevenueGoal

aux RevenueGoal = GRAPH(TIME,1994,1,[800000,950000,1000000,1070000,

1140000,1210000,1290000,1340000,1390000,1430000,1450000"

Min:0;Max:1500000;Zoom"])

SalesforceAttritionRate

aux SalesforceAttritionRate = 1*EffectOfCommisions

SalesForceCosts

aux SalesForceCosts = NumberOfSalesPeople*(AverageSalaryOfSalesPerson+

(SalesForceInvoices*AvgInvoice*SalesForceIncentives)+TrainingCosts)

SalesForceInvoices

aux SalesForceInvoices = NormSalesforceInvoices*

EffectOfCustomerSatisfactionOnInvoices

SalesRevenue

aux SalesRevenue = AvgInvoice*TotalInvoices

TimeToHireSalesPeople


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aux TimeToHireSalesPeople = EffectOfCommisions*NormalTimeToHireSalesPeople

TotalCosts

aux TotalCosts = CostOfGoodsSold+FixedCosts+LaborCosts

TotalInvoices

aux TotalInvoices = NonSalesForceRelatedInvoices+TotalSalesForceInvoices

TotalProductionStaff

aux TotalProductionStaff = ARRSUM(ProductionStaff)

TotalSalesForceInvoices

aux TotalSalesForceInvoices = SalesForceInvoices*NumberOfSalesPeople

TotalWorkforce

aux TotalWorkforce = NumberOfSalesPeople+ARRSUM(ProductionStaff)

AnnualCostPerSquareFoot

const AnnualCostPerSquareFoot = 12

AverageSalaryOfSalesPerson

const AverageSalaryOfSalesPerson = 1200*12

doc AverageSalaryOfSalesPerson = Average salary of sales force in 1994.

AvgProductionSalary

dim AvgProductionSalary = (ProductionGroups)

const AvgProductionSalary = [30000,15600,30000]

doc AvgProductionSalary = Full Time Equivalents. Press people and pre-press people

and managers make on average $12 per hour. Bindery and copier operators and

drivers make $7.50 per hour. Roughly 2/3 of the people are $12 and 1/3 are 7.50 =

about 10.50 per hour.


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CapacityLife

const CapacityLife = 7

doc CapacityLife = This is a mix of 3 - 4 years for a copier and longer for the press.

CopiesPerInvoice

const CopiesPerInvoice = INIT(AvgInvoice)/.05

DowntimeFraction

const DowntimeFraction = 10%

EquipmentQuality

const EquipmentQuality = 1

HireRateForSalesPeople

const HireRateForSalesPeople = 1

InitialEquipmentUnitCost

const InitialEquipmentUnitCost = 11000

InitProductionStaff

dim InitProductionStaff = (ProductionGroups)

const InitProductionStaff = [2,4,2]

NormalCycleTime

const NormalCycleTime = 4.5

doc NormalCycleTime = Days for printing

NormSalesforceInvoices

const NormSalesforceInvoices = 800000/120/8

doc NormSalesforceInvoices = The sales person did 12.5% of total sales in 1994.

ProductionStaffAttritionRat


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dim ProductionStaffAttritionRate = (ProductionGroups)

const ProductionStaffAttritionRate = [.67,.5,1]

ProductionTrainingCosts

const ProductionTrainingCosts = 500

doc ProductionTrainingCosts = 2 days of training per person per year, $150 per

person, =300, $200 for their time = $500 per person per year.

SalesForceIncentives

const SalesForceIncentives = 10%

doc SalesForceIncentives = Sales force incentives per person

TimeToAddNewCapacity

const TimeToAddNewCapacity = 1/12

TimeToHireProductionStaff

dim TimeToHireProductionStaff = (ProductionGroups)

const TimeToHireProductionStaff = [0.083,0.04,0.083]

TimeToMakeStaffingDecisions

dim TimeToMakeStaffingDecisions = (ProductionGroups)

const TimeToMakeStaffingDecisions = [0.167,0.167,0.167]*0

TimeToMove

const TimeToMove = TIMESTEP

TrainingCosts

const TrainingCosts = 840

doc TrainingCosts = 4 days of training per year, $150 per day of training. $1200 a


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month salary, 20 working days in a month, 1/5 x 1200 = 240 240 + 600= 840

VariableCostsPerInvoice

const VariableCostsPerInvoice = (27%*800000/INIT(TotalInvoices))

doc VariableCostsPerInvoice = This came from P&L Statement from 1995, Colorado.

Year

const Year = 12


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Appendix F


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Appendix G

ABC/CND/Powersim Evaluation Form

Do you like the software? Why?Is it realistic model?What do you think about results from the

project?What do you think about the design of the project?

Text/Content

Organization

Performance

Graphics

Additional comments or recommendations:


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A System Dynamic Simulation Model

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