Organizations may fail to adopt sustainable solutions as a result of incomplete and/or inaccurate feedback into the decision making process. Events that cause harm - environmental, health, or social - are commonly the delayed effect of a prior course of action, itself the result of decisions that emerge from endogenous policy. By accelerating the cost of future harm into current period decisions, producers and purchasers have greater access to the quantity and quality of information that influence decisions to produce and consume. The creation of a financial policy structure that makes future, long-term costs of production, promotion, and consumption explicit in the decision process will correct a current deficiency in the analysis of costs and benefits made by producers and purchasers. Such a feedback loop would correct a structural market failure and could reduce the need for governmental regulation.
Environmental strategies such as Zero-to-Landfill are gaining increasing attention throughout the world. Product take back is a significant means of ensuring that products that have reached the end of their useful lives are reclaimed for reuse, remanufacturing, or recycling. Such a strategy is expected to minimize environmental impacts, reduce overall resource consumption, and provide economic value to manufacturers and consumers. The reverse logistics, however, can be quite complicated as product collection, product disassembly, processing, component returns, and component reclamation must be considered. Further, the costs and magnitude of the requisite system must be projected to support appropriate planning and execution. In this paper, we present a model of a reverse logistics system for a consumer product. The impacts of closed-loop logistics on product adoption rate, product costs, and component reliabilities are balanced against the cost of new infrastructure, shipping and tracking, and processing and inventorying of expended components. We illustrate how a reverse logistics approach may develop as a function of product adoption, the total value of returned components, product reliability, and product lifetime. A Zero-to-Landfill strategy has a significant potential to improve the triple bottom line people, planet, and profit of companies that adopt it.
This paper presents a dynamic hypothesis explaining the system dynamics underlying the identity theft epidemic. The causal loop structure synthesizes current understanding of the problem and suggests that any strategy to address the identity theft epidemic by primarily focusing on prosecuting thieves without effectively mitigating the underlying forces is doomed to failure. The causal loop diagram elucidates the dominant feedback structure ...a collection of rapid-feedback, self-reinforcing dynamics that generate ample opportunities for would-be thieves. Preliminary results from the analysis provide a foundation for exploring policy options through a full working model, yet to be developed.
PANEL: Andrei Borshchev, Xjtek,Russia; Nate Osgood MIT,USA; Mark Paich, Decisio Consulting, USA; Hazhir Rahmandad, Sloan School of Management, MIT, USA; Mark Heffernan, International System Dynamics, Australia; Sara Metcalf, University of Illinois, USA; Chris Johnson General Electric, USA;Geoff McDonnell UNSW Australia; Other users from industry.
There is increasing interest in combining agent based (AB) and system dynamics (SD) modeling methods. This workshop will demonstrate the differences between the AB and SD approaches using some popular examples from the Dynamics of Contagion and the Diffusion of Innovation, using the AnyLogic multi-method software. It will also walk through some practical examples of the use of combined methods in health, marketing and other industries. The workshop will conclude with a "warts and all" panel discussion involving experienced SD practitioners and researchers in SD, geography and computer science, all of whom are adding AB methods to their work.
Electric power systems are traditionally designed and developed with the assumption that demand is exogenous to the system. Connecting the feedbacks from the system to consumers will provide incentives for consumers to reduce demand during periods of high system prices. A system dynamics model is used to analyze the dynamics and long term implications of adoption of technology to enable demand response. The model includes the decision by consumers to adopt demand response technology along with decisions by investors to build generation capacity. The adoption process reduces overall system prices for peak demand periods, creating feedbacks with generation investment. The effects of technology improvement via learning, long term demand elasticity, and policies to promote adoption are considered. The results of the simulations show that diminishing returns to adopters and significant externalities in terms of free rider effects limit the attraction of individual adoption. A subsidy to alleviate the costs to individuals can be justified by the significant system level savings from widespread adoption. Several pernicious effects can emerge from large scale demand response, however, including increased price volatility due to a reduction in generation capacity reserve margin, an increase in long term demand, and increased emissions from the substitution of coal plants for natural gas and renewable generation capacity.
In todays economy all manufacturers need to pay attention on how to build strong and long-term relationships with their dealers chain. In fact, it has been demonstrated that short term policies aimed to provide dealers immediate benefits (e.g., price discounts) may prevent the development of long term and fruitful relationships. Also supporting dealers in promoting manufacturers products has been proved as a sustainable strategy in long run.
Another implication of manufacturers bounded policies refers to their inclination to reinvest significant amounts of their sales revenues in advertising and product portfolio improvement, without taking into account the need to invest in dealers human resources, to make their strategies sustainable.
Based of the above remarks, this paper aims to demonstrate the usefulness of a system dynamics approach in involving both manufacturers and dealers in strategic reasoning.
Empirical evidence arising from a research project conducted by the authors with a manufacture operating in a high-tech industry, shows that using system dynamics as a methodology to support communication and learning may act as a significant lever to design successfully long term oriented policies. Such policies ought to increase dealers skills and motivation, and improve potential customers awareness of product benefits, at the same time.
The evolution of fleet maintenance and management policies highlights the growing importance of maintenance issues in both private and public companies. The need to improve maintenance performance requires an accurate evaluation of the trade-off between costs and benefits related to alternative fleet maintenance and management policies. However, the complexity of maintenance system makes this evaluation a very difficult task.
More often a fleet manager deals with the following key issues:
is it more profitable to repair or to renew the company fleet?
Is it more convenient to reduce the average age of the different assets (e.g., by increasing investments in new bus) or to expand the maintenance activities (e.g., by rising repairing costs)?
In fact, fleet managers cannot ignore the impact of their decisions on both company service and financial performance over time.
Aim of this paper is to show how the System Dynamics approach can effectively support fleet managers in designing and evaluating their strategies. The simulation model here presented is based on the result of a project with two Italian city bus companies. Through such tool decision makers can test different fleet strategies and assess their effects on company performance.
Modelling knowledge in SD organisational interventions may become a puzzling task because of difficulties in achieving a common shared view among business key-actors about the impact of Intellectual Capital (IC) investments on future company performance.
Such difficulties are not only related to the intangible nature of IC, but also to the indirect role of knowledge in affecting performance drivers and outcomes. This phenomenon is particularly relevant in service businesses, where intangibles account for a high percentage of total assets.
In order to overcome such problems, a conceptual framework has been developed by the authors to build a generic SD model aimed to support business decision makers in IC planning, with particular regard to service firms.
Such model has provided the basis for developing two ILEs focused on a telecom mobile service provider and an insurance company. The first application was related to an education project, while the second one was linked to a consulting assignment.
The use of a conceptual framework as a basis to build an ILE has proved to be a successful strategy in order to better communicate business key-actors the potential of SD in modelling and assessing IC policies.
Main key-issues underlying model development and the ILEs application are discussed in the paper, and most significant outcomes from simulations are commented.
The phenomenon of dwarf or stunted small and micro firms (in Italian nanismo aziendale) is recognised in the small business literature. These are firms that have survived through many years, maybe many generations, providing their owners with acceptable returns and lifestyles, but have remained very small. They might therefore represent potential lost opportunities for owners and, given the importance of the SME sector, local employment and economies. A system dynamics model replicating the basic no-growth, cyclical behaviour attributed to stunted SMEs is firstly analysed. Alternative policies arising from different entrepreneurial views and aimed at changing behaviour to one of stability or steady growth, are then tested and analysed. In this relatively simple form, the model does link behaviours to system structure and could support individual entrepreneurs in understanding the reasons for dwarfism in their firm and the potential for unleashing growth. It could also form the basis for a more detailed model to support the identification and evaluation of strategic alternatives in individual firms.
The complexity and characteristics of the pharmaceutical firm present an intriguing context for underlying information management issues during clinical trials for new drug development. This paper reports on the evaluation and performance of MIS for information management in clinical trials in new drug development. The main objective of the study is to examine the economic and business impacts of automating that process, to enhance our understanding of informational stakes involved, using a system dynamics (SD) model. The SD method is enriched in this paper with other conceptual frameworks such as Alters (2001) Work Centered Analysis (WCA) and the Balanced Scorecard (BSC) (Kaplan and Norton, 2001). Results of the simulations for alternative sensitivity analyses on errors rates in data transmissions, that is, on alternative error-rate specifications, do not necessarily influence project delay, but rather work intensity. A discussion details the usefulness of enriching the SD modeling process with alternative conceptual frameworks in the problem definition in such complex settings.