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Introduction System Dynamics. Un instrument for System Thinking. Learning Objectives. After this class the students should be able to: recognize their cognitive capacity limitation to deal is dynamic systems;
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Introduction System Dynamics Un instrument for System Thinking
Learning Objectives • After this class the students should be able to: • recognize their cognitive capacity limitation to deal is dynamic systems; • understand the mean concepts of System Dynamics, such as feedback loop, delays; and archetype of systems; and • interpret System Dynamics diagrams
Time management • The expected time to deliver this module is 50 minutes. 20 minutes are reserved for team practices and exercises and 30 minutes for lecture
An experiment • Suppose a simple supply chain that has been in steady-state for some time. The Retailer’s inventory has been constant at some level for a long time,
steady-state supply chain • A retailer maintains an inventory of product that is shipped to customers on demand. • Upon shipping, the retailer always orders immediately from his supplier the same amount of product just shipped. • The supplier also is very regular. He always deliveries the product to retailer 7 days after the he places the order. • The supplier has never been out‑of‑stock (and never will be!). • No product shipped by the supplier is ever, or will ever be, defective, damaged or lost in transit.
Demand changes • Suppose, all of a sudden, the volume of demand from customer coming into the retailer steps up to a new higher level, and then remains there.
Sketch the new behavior • On the axes provided in Figure I, sketch the pattern you think will be traced by the level of the retailer's inventory, over time, following the one‑ step‑increase to customer demand. ( Each team has 5 minute to give a answer. ) Figure 1
The retailer's inventory behavior • following the step‑increase in demand, the Retailer's inventory will decline in a straight‑line manner for 7 days; it then will level off and remain at the new, lower level.
Cognitive Capacity limitation “In the long history of evolution it has not been necessary until very recent historical times for people to understand complex feedback systems. Evolutionary processes have not given us the mental ability to interpret properly the dynamic behavior of those complex systems in which we are now imbedded.” Forrester, 1973
System Dynamics • In particular, to analyze how the interaction between structures of the systems and their policies determine the system behavior • Methodology to study systems behavior
Filling a cup of water • Each team is invited to describe through any kind of diagram (or algorithm) the process to fill a cup of water. Imagine this as an exercise of operation management. (10 minutes)
Faucet Position Desired Water Level Perceived Gap Water Flow Current Water Level Language: causal diagram
Feedback loop and Delay • When we fill a glass of water we operate in a "water‑regulation" system involving five variables: • our desired water level, the glass's current water level; • the gap between the two; • the faucet position; and • and the water flow. • These variables are organized in a circle or loop of cause‑effect relationships which is called a "feedback process.“ • Delays are Interruptions between actions and their consequences
Faucet Position Desired Water Level Delay Perceived Gap Water Flow Current Water Level Feedback loop with delay
Faucet Position Desired Water Level Influence Influence Perceived Gap Water Flow Influence Current Water Level Influence The means of arrows
+ Order Placed Desired Inventory Level + - + Perceived Gap Supply Line - Current Inventory Level + Negative feedback • Balancing Process for Adjusting Cash Balance to Cash Surplus or Shortage
Sales + Positive Word Mouth Satisfied Customers Positive feedback • Reinforcing Sales Process Caused by Customers Talking to Each Other About Your Product
Archetypes of systems • Certain patterns of structure recur again and again. These generic structures are named "systems archetypes". • Archetype systems are a set of reinforcing and balancing feedback and delays interconnected. • A relatively small number of these archetypes are common to a very large variety of management situations. • Approach developed to study system behaviors taking into account complex structures of feedbacks and time delays. • The industrial environment, seen as a set of stocks and activities linked by flow of information and flow of material submitted to time delays, is a typical object for System Dynamics study.
Reference • Peter Senge, • The Fifth Discipline, 1990 • Chapter 5
Learning in and about Complex Systems Sterman (1994) Unknown structure Dynamic complexity Time Delays Impossible experiments Real World Virtual World Known structure Variable Complexity Controlled Experiments Selected Missing Delayed Biased Ambiguous Implementation Game playing Inconsistency Short term Information Feedback Decisions Misperceptions Unscientific Biases Defensiveness Strategy, Structure, Decision Rules Mental Models Inability to infer dynamics from mental models
Changing over time Tightly coupled Governed by feedback Nonlinear: changing dominant structure History-dependent Self-organizing Adaptive Counterintuitive Policy resistant Characterized by tradeoffs Dynamic Complexity arises because systems are…
Thinking dynamically Move from events and decisions to patterns of continuous behavior over time and policy structure Thinking in circular causal / feedback patterns Self-reinforcing and self-balancing processes Compensating feedback structures and policy resistance Communicating complex nonlinear system structure Thinking in stocks and flows Accumulations are the resources and the pressures on policy Policies influence flows Modeling and simulation Accumulating (and remembering) complexity Rigorous (daunting) model evaluation processes Controlled experiments Reflection System Dynamics Contributions
The system dynamics modeling process Adapted from Saeed 1992
Six Traditions Contributing to the Evolution of Feedback Thought • Biology: math models • Econometrics • Engineering • Social Sciences • Biology: homeostasis • Logic • Two Threads of Feedback Thought • System dynamics arises in theservomechanisms thread • (the first four in this list)
Forrester’s Hierarchy of System Structure • Closed boundary around the system • Feedback loops as the basic structural elements within the boundary • Level [stock] variables representing accumulations within the feedback loops • Rate [flow] variables representing activity within the feedback loops • Goal • Observed condition • Detection of discrepancy • Action based on discrepancy
The Endogenous Point of View • The closed causal boundary takes top billing • Dynamics arise from interactions within that boundary • Systems thinking is the mental effort to uncover endogenous sources of system behavior.
Global Average Temperature(Reconstruction 1400-1980; Data 1902-1998)
Stocks and flows help to explain self-reported drug use data
The Simplified Structure--variables • NAME MNEMONIC Actual Inventory AI Desired Inventory DI Order Rate OR Adjustment Time AT
? ‘Challenging the clouds’ in a study of leasing in the automobile industry “We’re not in the used car business!”
Intuitive view of effect of leasing on auto sales: Leased car pipeline
Stocks and Flows in Global Warming Thought experiment:
But although the stock-and-flow insight holds, global climate is of course much more complex than that. And still much more complex than this simple global climate model, as well!
Feedback Thinking “For one good deed leads to another good deed, and one transgression leads to another transgression.” (Pirke Avot)
