Systems Thinking, System Dynamics, Simulation
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Course Content Structure—see Syllabus• Systems Thinking• System Dynamics• Continuous Deterministic Simulation
– VENSIM• Goldratt• Discrete Stochastic Simulation
– PROMODEL
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Goals of this course…• To learn Senge’s five disciplines• How to build a learning organization• How to challenge mental models• Master the seven laws of systems thinking• Understand the principle of leverage
• To learn the basics of causal modeling– known as Causal Loop Diagramming, CLD
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SD Process• Issue statement. The issue
statement is simply a statement of the problem that makes it clear what the purpose of the model will be.
• Variable Identification.Identify some key quantities that will need to be included in the model for the model to be able to address the issues at hand.
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• Reference modes.A reference mode is a pattern of behavior over time. Reference modes are drawn as graphs over time for key variables, but are not necessarily graphs of observed behavior. For example, a company's sales history may be growing but bumpy, and the reference mode may be the up and down movement around the growth trend. Reference modes can refer to past behavior, or future behavior.
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• Reality Check. Define some Reality Check statements about how things must interrelate. These include a basic understanding of what actors are involved and how they interact, along with the consequences for some variables of significant changes in other variables. Reality Check information is often simply recorded as notes (often mental notes) about what connections need to exist. It is based on knowledge of the system being modeled. Chapter 14 of the User Guide makes this information explicit using the Reality Check functionality in Vensim.
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• Dynamic hypotheses. A dynamic hypothesis is a theory about what structure exists that generates the reference modes. A dynamics hypothesis can be stated verbally, as a causal loop diagram, or as a stock and flow diagram. The dynamic hypotheses you generate can be used to determine what will be kept in models, and what will be excluded. Like all hypotheses, dynamic hypotheses are not always right. Refinement and revision is an important part of developing good models.
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• Simulation Model.A simulation model is the refinement and closure of a set of dynamic hypotheses to an explicit set of mathematical relationships. Simulation models generate behavior through simulation. A simulation model provides a laboratory in which you can experiment to understand how different elements of structure determine behavior.
• The above process is iterative and flexible. As you continue to work with a problem you will gain understanding that changes the way you need to think about the things you have done before.
• Vensim provides explicit support for naming variables, writing Reality Check information, developing dynamic hypotheses and building simulation models. Dynamic hypotheses can be developed as visual models in Vensim, or simply sketched out with pencil and paper.
Workforce, Inventory and OscillationBackground • You are involved in the production and sale of
prefabricated window frames. Overall your company is doing quite well, but you often go through periods of low capacity utilization followed by production ramp up and added shifts. While all of this is normally blamed on market demand and the condition of the economy, you have your doubts. Looking back at sales and production over the last 8 years it seems that sales is more stable than production. Your goal is to determine why this might be, and what you can do about it.
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• In attacking this problem you want to simplify as much as possible your current situation. There are a number of reasons for this simplification:1. It is easier to understand a simple model.2. You can get results quickly and decide if you are
on the right track.3. It is more effective to start with a simple model
and add detail, than to build a complex model and attempt to extract insights from it after it is complete.
4. Using a simple model forces you to take an overview which is usually useful in the initial modeling phases.
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Reference mode• A reference mode is a graphical statement about a problem. Verbally, the problem was stated as "production is less stable than sales."
• This reference mode is a sketch of behavior we might expect a model to produce. It might be real data from your records, or your expectation of what might happen in a new situation. The reference mode is used to focus activity. Having mapped out one or more reference modes the goal is to define the simplest structure that is sensible and capable of generating patterns of behavior that qualitatively resemble the reference modes. If appropriate, such a structure can also be refined in order to develop a model that can be validated quantitatively against the available data.
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Reality CheckLets put down some common sense statements about how the business works.
1.Without any workers there is no production.2.Without any inventory we can't ship.3.If sales go up for a sustained period we will try
to expand production.4.With no production inventory will never go up.Reality Check information in this form should be
kept in the back of your mind as you develop dynamics hypotheses and build a simulation model.
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Dynamic HypothesisA dynamic hypothesis is an idea about what structure might be capable of generating behavior like that in the reference modes. For this example we can formulate a dynamic hypothesis simply by thinking about how the two variables in the reference mode are connected — that is by specifying the set of policies (or rules) that determine production given sales. The dynamic hypothesis for this firm is that a manager is setting production based on current sales, but is amplifying the amount resulting in higher (or lower) production than is necessary. The reference mode supplies us with two variables — production and sales — that we will want to include in the model. This is a reasonably good basis on which to begin a sketch, so let us put these variables down to start the model.
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Workforce / Inventory ModelProduction and sales related• Physical: production is required to
produce goods to sell• Information: managers base production decisions
on current or recent salesHowever, as a first approximation, more
people make more products, and this is a good starting point, so we add the level Workforce.
The things that change workforce are hiring, layoffs, firings and retirements. Again, for simplicity we combine all of these into a composite concept — the net hire rate. Note that net hire rate can either increase or decrease the workforce.
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The behaviorIn completing the information connection, we will try to keep
things as simple as possible. Starting with production we want to remove all the complexities of adding shifts and mothballing equipment and simply state that production is proportional to Workforce. We add the proportionality constant productivity. Also, net hire rate is dependent on the value of Workforce. This gives us:
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Equation Set wfinv1.vmfFINAL TIME = 100Units: MonthINITIAL TIME = 0Units: MonthTIME STEP = 0.25Units: MonthSAVEPER = TIME STEPUnits: MonthInventory = INTEG( production-sales, 300)Units: Framenet hire rate = (target workfo
rce-Workforce)/time to adjust workforce
Units: Person/Monthproduction = Workforce*prod
uctivityUnits: Frame/Month
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productivity = 1Units: Frame/Month/
Personsales = 100 + STEP(50,20
)Units: Frame/Monthtarget production = salesUnits: Frame/Monthtarget workforce = target
production/productivityUnits: Persontime to adjust workforce =
3Units: MonthWorkforce = INTEG( net hi
re rate, target workforce)
Units: Person
Model Refinement (wfinv2.vmf)In order to refine the model we introduce target
inventory, inventory correction and two additional Constants. The idea is simple — target inventory is the amount of stock that should be held based on expectations about sales. The inventory correction is the correction for a deviation of Inventory from its target. A new loop has been introduced and is highlighted.
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Additional equationtarget production = sales + inventory correction Units: Frame/Monthinventory correction = (target inventory - Inventory)/
TIME TO CORRECT INVENTORYUnits: Frame/MonthTIME TO CORRECT INVENTORY = 2 Units: Monthtarget inventory = sales * INVENTORY COVERAGE Units: FrameINVENTORY COVERAGE = 3 Units: Monthinventory correction is a stock adjustment formulation, just
as net hire rate was. Thetime to correct inventory represents the time required to notice significant changes in inventory and schedule corrections in production.
The important difference between this formulation and that of net hire rate is that the net hire rate directly influences the stock it is attempting to adjust (Workforce) whereasinventory correction influences target production, net hire rate,Workforce, production and finally inventory. This connection has an intervening level,Workforce, which has important dynamic consequences.
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Requirements for Completion• Midterm worth 30%• Final worth 30%• Homework worth 10%• Term project worth 20%• Presentation worth 5%• Class participation worth 5%
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Grades??!!• If you satisfactorily complete all
the work required in this course, you will get at least a B– My guarantee– If you turn in unsatisfactory work, I
will ask you to redo it• To get an A you must have a
course grade above 80.999sugeng purwoko, JTI utm
Term Project• You get to choose the topic• Topic is due on 7-9• Will ask you to turn-in as
homework your– Causal loop diagram– Stock-and-flow diagram
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Definitions and Terms• ST--Systems Thinking• SD--Systems Dynamics• CLD--Causal Loop Diagram• BOT--Behavior Over Time Chart• SFD--Stock & Flow Diagram
– Also called Forrester Schematic, or simply “Flow Diagram”
• quantity--any variable, parameter, constant, or output
• edge--a causal link between quantities
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What is system dynamics?• A way to characterize systems as stocks
and flows between stocks• Stocks are variables that accumulate the
affects of other variables• Rates are variables the control the flows
of material into and out of stocks• Auxiliaries are variables the modify
information as it is passed from stocks to rates
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A Simple Methodology• Collect info on the problem• List variables on post-it notes• Describe causality using a CLD• Translate CLD into SFD• Enter into VENSIM• Perform sensitivity and validation studies• Perform policy and WHAT IF experiments• Write recommendations
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Causal Modeling• A way to characterize the physics
of the system• Lacking: a Newton to describe the
causality in these socioeconomic systems
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Key Benefits of the ST/SD• A deeper level of learning
– Far better than a mere verbal description• A clear structural representation of
the problem or process• A way to extract the behavioral
implications from the structure and data
• A “hands on” tool on which to conduct WHAT IF
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Reinforcing Loop: Structure
Growth rate
Population
Sales
SatisfiedCustomers
Positive word ofmouth
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Reinforcing Loop: Behavior
Population20 B
10 B
00 20 40 60 80 100 120 140 160 180 200
Time (Year)
Population : pop1Population : Current sugeng purwoko, JTI utm
Balancing Loop: StructureDesired
Inventory
Actualinventory
Inventorygap
Order rate
O B
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Balancing Loop: BehaviorInventory
1,000
500
00 10 20 30 40 50 60 70 80 90 100
Time (Month)
Inventory : inv1 sugeng purwoko, JTI utm
Stock and Flow Notation--Quantities• STOCK
• RATE
• Auxiliary
Stock
Rate
i1
i2
i3
Auxiliary
o1
o2
o3
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Stock and Flow Notation--Quantities• Input/Parameter/Lookup
• Have no edges directed toward them• Output
• Have no edges directed away from them
i1
i2
i3
Auxiliary
o1
o2
o3sugeng purwoko, JTI utm
Inputs and Outputs• Inputs• Parameters• Lookups
• Outputs
Input/Parameter/Lookup
a
b
c
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Stock and Flow Notation--edges• Information
• Flow
a b
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Some rules for translating CLD’s into SFD’s• There are two types of causal links in
causal models (but we don’t distinguish between them)– Information– Flow
1.Information proceeds from stocks and parameters/inputs toward rates where it is used to control flows
2.Flow edges proceed from rates to states (stocks) in the causal diagram always
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Systems Thinking basics• Having established two basic loop
types—reinforcing and balancing—let us proceed to a discussion of archetypes
• Archetypes use the basic reinforcing and balancing loops
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Nature’s Templates: the Archetypes• Structures of which we are
unaware hold us prisoner• The swimmer scenario
• Certain patterns of structure occur again and again: called ARCHETYPES
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We are creating a “language”
• reinforcing feedback and balancing feedback are like the nouns and verbs
• systems archetypes are the basic sentences• Certain behavior patterns appear again in all
disciplines--biology, psychology, family therapy, economics, political science, ecology and management
• Can result in the unification of knowledge across all fields
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Recurring behavior patterns• Do we know how to recognize
them?• Do we know how to describe them?• Do we know how to prescribe cures
for them?• The ARCHETYPES describe these
recurring behavior patterns
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The ARCHETYPES • Provide leverage points, intervention
junctures at which substantial change can be brought about
• Put the systems perspective into practice• About a dozen systems ARCHETYPES
have been identified• All ARCHETYPES are made up of the
systems building blocks: reinforcing processes, balancing processes, delays
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As mentioned, before attacking the ARCHETYPES we need to understand simple structures
• The reinforcing feedback loop• The balancing feedback loop
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ARCHETYPE 1: LIMITS TO GROWTH• A reinforcing process is set in motion
to produce a desired result. It creates a spiral of success but also creates inadvertent secondary effects (manifested in a balancing process) that eventually slow down the success.
• All growth will eventually run up against constraints, impediments
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Management Principle relative to ARCHETYPE 1• Don’t push growth or success;
instead, remove the factors limiting growth
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ARCHETYPE 1: LIMITS TO GROWTH• Useful in all situations where
growth bumps up against limits• Firms grow for a while, then plateau• Individuals get better for a while,
then their personal growth slows.• Falling in love is kind of like this
• The love begins to plateau as the couple get to know each other better
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Structure
state of stockgrowing action slowing action
BalancingReinforcing
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Understanding the Structure• High-tech orgs grow rapidly
because of their ability to introduce new products
• This growth plateaus as lead times become too long
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How to achieve Leverage
• Most managers react to the slowing growth by pushing harder on the reinforcing loop
• Unfortunately, the more vigorously you push the familiar levels, the more strongly the balancing process resists, and the more futile your efforts become.
• Instead, concentrate on the balancing loop--changing the limiting factor
• This is akin to Goldratt’s Theory of Constraints--remove the bottleneck, the impediment
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Applications to Quality Circles and JIT• Quality circles work best when there is
even-handed emphasis on both balancing and reinforcing loops
• JIT has had to focus on recalcitrant suppliers• THERE WILL ALWAYS BE MORE LIMITING
PROCESSES• When one source of limitation is removed, another will
surface• Growth eventually WILL STOP
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Create your own LIMITS TO GROWTH story• Identify a limits to growth pattern
in your own experience• Diagram it
– What is growing– What might be limitations– Example--the COBA and University
capital campaigns– NOW, LOOK FOR LEVERAGE
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Test your LIMITS TO GROWTH model• Talk to others about your perception• Test your ideas about leverage in
small real-life experiments• Run and re-run the simulation
model• Approach possible resistance and
seek WIN-WIN strategies with them
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ARCHETYPE 2: shifting the burden
• An underlying problem generates symptoms that demand attention. But the underlying problem is difficult for people to address, either because it is obscure or costly to confront. So people “shift the burden” of their problem to other solutions--well-intentioned, easy fixes that seem extremely efficient.
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Shifting the burden scenario, continued• Unfortunately, the easier solutions
only ameliorate the symptoms; they leave the underlying problem unaltered. The underlying problem grows worse and the system loses whatever abilities it had to solve the underlying problem.
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The Stereotype Structure
Problem
Symptomatic Solution
Fundamental Solution
Side effect
BALANCING
BALANCING
REINFORCING
Symptom-CorrectingProcess
Problem-Correcting Process
Addiction Loop
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Special Case: Eroding Goals• Full employment meant 4%
unemployment in the 1960s, but 6 to 7% unemployment in the early 1980’s
• Gramm-Rudman bill called for reaching a balanced budget by 1991, but this was shifted to 1993 and from 1993 to 1996 and from 1996 to 1997
• “If all else fails, lower your goals..”
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EXAMPLEAlcohol
Stress/Depression
Reduce workload
Health
BALANCING
BALANCING
Alcohol
Stress/Depression
Reduce workload
Health
BALANCING
BALANCING
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Another Example
Costs of Higher Ed not funded by State or Students
Raise tuition, add course fees, etc.
Lower enrollments
Perceived cost to the student
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Still Another ExampleHeroics and Overtime
Project Delayed
Efectiveness of PM practices
Reward for heroic behavior
Improvement of processes/practices
Symptom-correctingprocess
Problem-correctingProcess
Addiction Loop
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Still other Problems• What about retention of students• The perceived fix is raise the
admission standards• What about drug-related crime• The perceived fix is to remove the
drugs from the street
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“Shifting the Burden” is an insidious problem• Is has a subtle reinforcing cycle• This increases dependence on the
symptomatic solution• But eventually, the system loses
the ability to apply the fundamental solution
• The system collapsessugeng purwoko, JTI utm
Senge Says• Today’s problems are yesterday’s
solutions• We tend to look for solutions
where they are easiest to find• The easy way out usually leads
back in
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HOW TO ACHIEVE LEVERAGE• Must strengthen the fundamental
response– Requires a long-term orientation and
a shared vision• Must weaken the symptomatic
response– Requires a willingness to tell the truth
about these “solutions”sugeng purwoko, JTI utm
Create your own “Shifting the Burden” Story
• Is there a problem that is getting gradually worse over the long term?
• Is the health of the system gradually worsening?
• Is there a growing feeling of helplessness?• Have short-term fixes been applied?
• The local Mexican restaurant problem of using coupons to generate business and then can’t get away from using the coupons because their customer base is hooked on coupons
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To structure your problem• Identify the problem• Next, identify a fundamental solution• Then, identify one or several
symptomatic solutions• Finally, identify the possible negative
“side effects” of the symptomatic solution
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Review• We have now seen two of the basic systems
archetypes. – The Limits to Growth Archetype– The Shifting the Burden Archetype
• As the archetypes are mastered, they become combined into more elaborate systemic descriptions.
• The “sentences” become parts of paragraphs• The simple stories become integrated into
more involved stories
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Robust Loops• In any loop involving a pair of
quantities/edges, • one quantity must be a rate• the other a state or stock, • one edge must be a flow edge• the other an information edge
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CONSISTENCY• All of the edges directed toward a
quantity are of the same type• All of the edges directed away
from a quantity are of the same type
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Rates and their edges
q1
q2
q3
RATES
q4
q5
q6
Informationedges
Flow edges
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Parameters and their edges
PARAMETER
q1
q2
q3
Informationedges
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Stocks and their edges
q1
q2
q3
STOCK
q4
q5
q6
Flow edges Information edges
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Auxiliaries and their edges
AUXILIARY
q1
q2
q3
q4
q5
q6
Informationedges
Informationedges
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Outputs and their edges
OUTPUT
q1
q2
q3
Informationedges
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STEP 1: Identify parameters• Parameters have no edges
directed toward them
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STEP 2: Identify the edges directed from parameters• These are information edges
always
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STEP 3: By consistency identify as many other edge types as you can
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STEP 4: Look for loops involving a pair of quantities only• Use the rules for robust loops
identified above
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q1
q2
q3 q4
q5
q6
q7
q8
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q3
q6
q2
q7
q1
q4
q5 q8
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Distinguishing Stocks & Flows by NameNAME UNITS
Stock or flow• Revenue• Liabilities• Employees• Depreciation• Construction starts• Hiring• material standard of living
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The VENSIM User Interface• The Time bounds Dialog box
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A single-sector exponential growth model• Einstein said the most powerful
force in the world was compound interest
• interest taken in relation to principal
• Each stock requires an initial valueinterest prinicipal
Interest rate
R
Principal
Interest
Interest rate
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Let’s DO IT• Create the stock principal• Include the rate interest• Include the information connector• Initialize the stock• Simulate
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John vs. Jack• Each works for 30 years before retiring• John makes $2000 contributions to his IRA
each year for the first five years and none there after.
• Jack makes $2000 contributions to his IRA each year beginning in year six and continuing through year 30
• Each IRA yields a 15% compounded return• Which turns out to be larger?
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John vs. Jack--two interest accounts.mdl
Principal
Interest
Interest rate
Principal 0
Interest 0
Interest rate 0
contributions
contributions 0
<Time>
John
Jack
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John vs. Jack800,000
400,000
00 6 12 18 24 30
Time (Year)
Principal : int1Principal 0 : int1
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Contributions of John vs. those of Jack2,050
1,525
1,000
475
-500 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30
Time (Year)
contributions : int1contributions 0 : int1 sugeng purwoko, JTI utm
Another single-sector Exponential growth Model• Consider a simple population with infinite
resources--food, water, air, etc. Given, mortality information in terms of birth and death rates, what is this population likely to grow to by a certain time.
• A population of 200,000, growing at 1.3% a year.
• A population of 1.6 billion with a birth rate norm of .04 and a death rate norm of .028
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Experiments with growth models• Models with only one rate and one
state• Average lifetime death rates• Models in which the exiting rate is
not a function of its adjacent state
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Example:• Build a model of work flow from work
undone to work completed.• This flow is controlled by a “work rate.” • Assume that are 1000 days of undone
work• Assume the work rate is 20 completed
days a month• Assume the units on time are months• Assume no work is completed initially.
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Solving the problem of negative stock drainage• pass information to the outgoing
rate• use the IF THEN ELSE function
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Shifting loop Dominance• Rabbit populations grow rapidly with a
reproduction fraction of .125 per month• When the population reaches the carrying
capacity of 1000, the net growth rate falls back to zero, and the population stabilizes
• Starting with two rabbits, run for 100 months with a time step of 1 month
• (This model has two loops, an exponential growth loop (also called a reinforcing loop) and a balancing loop)
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Shifting loop Dominance• Assumes the following relation for Effect of
Resources• Effect of Resources = (carrying capacity -
Rabbits)/carrying capacity• This is a multiplier• Multipliers are always dimless (dimensionless)• When rabbits are near zero, this is near 1• When rabbits are near carrying capacity, this is
near zero– This will shut down the net rabbit birth rate
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RabbitsNet Rabbit Birth rate
Effect of resourcesCarrying capacity
Normal Rabbit Growth Rate
B
R
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Rabbits1,000
40
00
0 20 40 60 80 100Time (Month)
Rabbits : rab1Net Rabbit Birth rate : rab1
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Dimensionality Considerations• VENSIM will check for dimensional
consistency if you enter dimensions• Rigorously, all models must be
dimensionally consistent• What ever units you use for stocks,
the associated rates must have those units divided by TIME
• An example followssugeng purwoko, JTI utm
Cascaded rate-state (stock) combinations• In the oil exploration industry, unproven
reserves (measured in barrels) become proven reserves when they are discovered. The extraction rate transforms proven reserves into inventories of crude. The refining rate transforms inventories of crude into refined petroleum products. The consumption rate transforms refined products into pollution (air, heat, etc.)
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Another cascaded rate-stock combination• Population cohorts. Suppose
population is broken down into age cohorts of 0-15, 16-30, 31-45, 46-60, 61-75, 76-90
• Here each cohort has a “lifetime” of 15 years
• Again, each rate has the units of the associated stocks divided by time
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A single-sector Exponential goal-seeking Model• Sonya Magnova is a resources planner
for a school district. Sonya wishes to a maintain a desired level of resources for the district. Sonya’s new resource provision policy is quite simple--adjust actual resources AR toward desired resources DR so as to force these to conform as closely as possible. The time required to add additional resources is AT.
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The Sector Approach to the Determination of Structure• What is meant by “sector?”• What are the steps
– to determination of structure within sectors
– to determination of structure between sectors
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Definition of sector• All the structure associated with a
single flow• Note that there could be several
states associated with a single flow– The next sector in the pet population
model has three states in it
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Sector Methodology, Overall• Identify flows (sectors) that must
be included within the model• Develop the structure within each
sector of the model. – Use standard one-sector sub-models
or develop the structure within the sector from scratch using the steps in Table 15.5
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Sector Methodology, Overall Cont’d• Develop the structure between all
sectors that make up the model• Implement the structure in a
commercially available simulation package
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Steps Required to Formulate the Structure for a Sector from Scratch• Specify the quantities required to
delineate the structure within each sector
• Determine the interactions between the quantities and delineate the resultant causal diagram
• Classify the quantity and edge types and delineate the flow diagram
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• Resource, facility and infrastructure (desks, chairs, computers, networks, labs, etc.) needs for an educational entity are driven by a growing population that it serves. Currently, the population stands at 210,000 and is growing at the rate of two percent a year. One out of every three of these persons is a student.
• One teacher is needed for every 25 students. Currently, there are 2,300 actual teachers; three percent of these leave each year. Construct a structure for each that drives the actual level toward the desired level. Assume an adjustment time of one year. Set this up in VENSIM to run for 25 years, with a time-step of .25 years.
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• One teacher is needed for every 25 students. One-hundred square feet of facility space is needed for each student. Thirty-five hundred dollars in infrastructure is needed for each student. Currently, there are 2,300 teachers; three percent of these leave each year. Currently, there is five million sq. ft of facility space, but this becomes obsolescent after fifty years. Currently, there is $205,320,000 in infrastructure investment, but this is fully depreciated after ten years. For each of infrastructure, teachers and facility space, determine a desired level or stock for the same. Construct a structure for each that drives the actual level toward the desired level.
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• Set this up in VENSIM to run for 25 years, with a time-step of .25 years. Assume adjustment times of one year. DETERMINE HOW MUCH IN THE WAY OF FACILITIES, TEACHERS AND INFRASTRUCTURE ARE NEEDED PER YEAR OVER THIS TIME PERIOD.
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What are the main sectors and how do these interact?• Population• Teacher resources• Facilities• Infrastructure
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Factors affecting teacher departures• Inside vs. outside salaries• Student-teacher ratios• How might these affects be
included?
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Teacher departure description• It is known that when the ratio of average
“inside the district” salary is comparable to outside salaries of positions that could be held by teachers, morale is normal and teacher departures are normal
• When the inside-side salary ratio is less than one, morale is low and departures are greater than normal
• The converse is true as wellsugeng purwoko, JTI utm
Teacher departure description• When student-teacher ratios
exceed the ideal or desired student teacher ratio, which is twenty four, morale is low and again departures are greater than normal
• The converse is true as well
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A Two-sector Housing/population Model• A resort community in Colorado has
determined that population growth in the area depends on the availability of housing as well as the persistent natural attractiveness of the area. Abundant housing attracts people at a greater rate than under normal conditions. The opposite is true when housing is tight. Area Residents also leave the community at a certain rate due primarily to the availability of housing.
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Two-sector Population/housing Model, Continued• The housing construction industry, on the
other hand, fluctuates depending on the land availability and housing desires. Abundant housing cuts back the construction of houses while the opposite is true when the housing situation is tight. Also, as land for residential development fills up (in this mountain valley), the construction rate decreases to the level of the demolition rate of houses.
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What are the main sectors and how do these interact?• Population• Housing
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What is the structure within each sector?• Determine state/rate interactions
first• Determine necessary supporting
infrastructure– PARAMETERS– AUXILIARIES
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What does the structure within the population sector look like?• RATES: in-migration, out-
migration, net death rate• STATES: population• PARAMETERS: in-migration normal,
out-migration normal, net death-rate normal
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What does the structure within the housing sector look like?• RATES: construction rate, demolition rate• STATES: housing• AUXILIARIES: Land availability multiplier,
land fraction occupied• PARAMETERS: normal housing
construction, average lifetime of housing• PARAMETERS: land occupied by each unit,
total residential land
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What is the structure between sectors?• There are only AUXILIARIES,
PARAMETERS, INPUTS and OUTPUTS
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What are the between-sector auxiliaries?• Housing desired• Housing ratio• Housing construction multiplier• Attractiveness for in-migration
multiplier• PARAMETER: Housing units
required per personsugeng purwoko, JTI utm
Nature’s Templates: the Archetypes• Structures of which we are
unaware hold us prisoner• The swimmer scenario
• Certain patterns of structure occur again and again: called ARCHETYPES
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We are creating a “language”• reinforcing feedback and balancing
feedback are like the nouns and verbs• systems archetypes are the basic sentences• Behavior patterns appear again in all
disciplines--biology, psychology, family therapy, economics, political science, ecology and management
• Can result in the unification of knowledge across all fields
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Recurring behavior patterns• Do we know how to recognize
them?• Do we know how to describe them?• Do we know how to prescribe cures
for them?• The ARCHETYPES describe these
recurring behavior patterns
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The ARCHETYPES • provide leverage points, intervention
junctures at which substantial change can be brought about
• put the systems perspective into practice• About a dozen systems ARCHETYPES have
been identified• All ARCHETYPES are made up of the
systems building blocks: reinforcing processes, balancing processes, delays
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Before attacking the ARCHETYPES we need to understand simple structures• the reinforcing feedback loop• the balancing feedback loop• THE DEMO
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ARCHETYPE 1: LIMITS TO GROWTH• A reinforcing process is set in
motion to produce a desired result. It creates a spiral of success but also creates inadvertent secondary effects (manifested in a alancing process) that eventually slow down the success.
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Management Principle relative to ARCHETYPE 1• Don’t push growth or success;
remove the factors limiting growth
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ARCHETYPE 1: LIMITS TO GROWTH• Useful in all situations where
growth bumps up against limits• Firms grow for a while, then plateau• Individuals get better for a while,
then their personal growth slows.• Falling in love is kind of like this
• The love begins to plateau as the couple get to know each other better
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Structure
state of stockgrowing action slowing action
BalancingReinforcing
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Understanding the Structure• High-tech orgs grow rapidly
because of ability to introduce new products
• This growth plateaus as lead times become too long
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How to achieve Leverage• Most managers react to the slowing
growth by pushing harder on the reinforcing loop
• Unfortunately, the more vigorously you push the familiar levels, the more strongly the balancing process resists, and the more futile your efforts become.
• Instead, concentrate on the balancing loop--changing the limiting factor
• This is akin to Goldratt’s Theory of Constraints--remove the bottleneck, the impediment
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Applications to Quality Circles and JIT• Quality circles work best when there is
even-handed emphasis on both balancing and reinforcing loops
• JIT has had to focus on recalcitrant suppliers• THERE WILL ALWAYS BE MORE LIMITING
PROCESSES• When once source of limitation is removed, another
will surface• Growth eventually WILL STOP
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Create your own LIMITS TO GROWTH story• Identify a limits to growth pattern
in your own experience• Diagram it
– What is growing– What might be limitations– Example--the COBA and University
capital campaigns– NOW, LOOK FOR LEVERAGE
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Test your LIMITS TO GROWTH model• Talk to others about your perception• Test your ideas about leverage in
small real-life experiments• Run and re-run the simulation
model• Approach possible resistance and
seek WIN-WIN strategies with them
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ARCHETYPE 2: shifting the burden• An underlying problem generates symptoms that
demand attention. But the underlying problem is difficult for people to address, either because it is obscure or costly to confront. So people “shift the burden” of their problem to other solutions--well-intentioned, easy fixes that seem extremely efficient. Unfortunately the easier solutions only ameliorate the symptoms; they leave the underlying problem unaltered. The underlying problem grows worse and the system loses whatever abilities it had to solve the underlying problem.
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The Stereotype Structure
Problem
Symptomatic Solution
Fundamental Solution
Side effect
BALANCING
BALANCING
REINFORCING
Symptiom-CorrectingProcess
Problem-Correcting Process
Addictioin Loop
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Special Case: Eroding Goals• Full employment meant 4%
unemployment in the 60’s, but 6 to 7% unemployment in the early 1980’s
• Gramm-Rudman bill called for reaching a balanced budget by 1991, but this was shifted to 1993 and from 1993 to 1996 and from 1996 to 1998
• “If all else fails, lower your goals..”
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EXAMPLEAlcohol
Stress/Depression
Reduce workload
Health
BALANCING
BALANCING
Alcohol
Stress/Depression
Reduce workload
Health
BALANCING
BALANCING
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Another Example
Costs of Higher Ed not funded by State
Raise tuition, add course fees, etc.
Lower enrollments
Perceived cost to the student
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Still Another ExampleHeroics and Overtime
Project Delayed
Efectiveness of PM practices
Reward for heroic behavior
Improvement of processes/practices
Symptom-correctingprocess
Problem-correctingProcess
Addiction Loop
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“Shifting the Burden” is an insidious problem• Is has a subtle reinforcing cycle• This increases dependence on the
symptomatic solution• But eventually, the system loses
the ability to apply the fundamental solution
• The system collapsessugeng purwoko, JTI utm
Senge Says• Today’s problems are yesterday’s
solutions• We tend to look for solutions
where they are easiest to find
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HOW TO ACHIEVE LEVERAGE• Must strengthen the fundamental
response– Requires a long-term orientation and
a shared vision• Must weaken the symptomatic
response– Requires a willingness to tell the truth
about these “solutions”sugeng purwoko, JTI utm
Create your own “Shifting the Burden” Story• Is there a problem that is getting
gradually worse over the long term?• Is the overall health of the system
gradually worsening?• Is there a growing feeling of helplessness?• Have short-term fixes been applied?
• The Casa Olay problem of using coupons to generate business and then can’t get away from using the coupons because their customer base is hooked on coupons
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To structure your problem• Identify the problem• Next, identify a fundamental solution• Then, identify one or several
symptomatic solutions• Finally, identify the possible negative
“side effects” of the symptomatic solution
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Review • We have now seen two of the basic systems
archetypes. – The Limits to Growth Archetype– The Shifting the Burden Archetype
• As the archetypes are mastered, they become combined into more elaborate systemic descriptions.
• The basic “sentences” become parts of paragraphs• The simple stories become integrated into more
involved stories
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Seeing Structures, not just Trees• Helps us focus on what is
important and what is not• Helps us determine what variables
to focus on and which to pay less attention to
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