A Preliminary Design of CSS Production-Distribution
Board-Type Simulation Game
Showing H. Young, Associate Professor
Shih Hui Lo, Doctoral Student
Sy-Feng Wang, Doctoral Student
Department of Business Management
’ National Sun Yat-Sen University, Kaohsiung, Taiwan, R.O.C.
ABSTRACT
The coordination in industrial systems should be one of the major challenges for future
competitive advantages. The issues of industrial system's coordination have been studied
in system dynamics at the very beginning of the field. However, system dynamists had
not put enough efforts to study the industrial "systems". This paper attempts to use
system dynamics approach to study the “dynamic complexity" issues in industrial
systems. The Center-Satellite System simulation game (CSS game), which based on
Taiwan's center-satellite industrial system (a-huge industrial system with over 120
Center-factories, each with up to 400 networked Satellite-factories) was developed:
Future research directions are discussed.
INTRODUCTION
Since the success of Japanese management style and the wild spread of Deming's
management philosophy, the coordination in industrial systems is one of the major
challenges for future competitive advantages. The issues of industrial system's
coordination have been studied in system dynamics since the very beginning of the field.
The first book of system dynamics, that is "Industrial Dynamics" (Forrester, 1961), had
shown how the structure of the multi-stage production-distribution systems tends to
amplify disturbances that occur at the previous stage. George Stalk and Thomas M. Hout
(1990), the authors of " "Competing Against Time: How Time-based Competition Is
Reshaping Global Markets", had reviewed the work of Forrester (1958) to explain time's
impact on the corporate's performance. One central concept of "Time-based
Competition" or "Just in time" is the same as Forrester's model, that is, to reduce delay
time to get smooth and stable flows (order flow and material flow). However, "Time-
based Competition" and "Just in time" are much more famous and operational than
"Industrial Dynamics". In our opinion, although there were some system dynamics
researches concerning industrial systems (e.g., Aloso and Frasier, 1991; Fey, 1962;
Kim, 1990; Lyneis, 1980; Sterman, 1984), system dynamists had not put enough efforts
to study the potential of system dynamics in the industrial systems.
This paper attempts to use the System Dynamics approach to study the “dynamic
complexity" issues in industrial systems. The paper was a preliminary report of the
project sponsored by Taiwan's "CSD" (Center-Satellite Factory System Development)
Industrial Coordination Center. The objectives of CSD were to help the coordination of
Taiwan's Center-Satellite industrial system, and to help those corporates to solve
systemic problems between center-factories and satellite-factories. After some contacts
between CSD and us, the first project was to develop a Center-Satellite System simulation
game (CSS game). The CSS game is designed (1) to improve managers’ shared mental
SYSTEM DYNAMICS '93 603
model in the “dynamic complexity" feature of the center-satellite system, and (2) to
develop manager's systems thinking abilities to discover more coordination opportunities
in their own center-satellite systems.
THE CSS GAME
Problem setting
Through the help of CSD, the problem selected in the CSS game was the issue about JIT.
One of the general difficulties of implementing JIT in Taiwan was the ill-fitness of
satellite-factories. When JIT technic was implemented in the center-factory, the satellite-
factories were asked to provide their products in "just in time" rate. In order to provide
products "just in time", strategies usually used by the satellite-factories were either reduce
the quality standard or increase the inventory level. The first strategy (reduce quality)
would interrupt the process in the center-factory; the quality control expenditure and the
probability of parts shortage would increase, and the quality of final products would
decrease. The second strategy (increase inventory) would increase the satellite-factory's
inventory costs, which might come from the reduction of other resources (e.g., R&D
budget).
The fundamental solution of this problem should be to implement JIT technic at the
satellite-factories at the same time. However, due to the deeply imbeded “corporate
boundary" in the manager's mental model, the center-factories either unaware of this
need, or unwilling to help the satellite-factories.
The CSS game is designed to simulate some dysfunctional consequences if the JIT
technic is implemented in the center-factory only. There are three center-factories in the
CSS. game. One center-factory has the opportunity to shorten the delay time (that is,
implementing JIT), while the others remain the same. The conditions of the satellite-
factories are all the same. Their capacities are all constrained. The constrained capacities
represent the lack of fundamental solution (i.e., the satellite factories implement JIT at the
same. time).
Task description
As shown’in Figure 1, there are three center-factories, three satellite-factories, one
consumer sector, and one consumer agency in this game. The consumer sector is
represented by paper cards with fixed consumer orders, which are received by the
consumer agency. The consumer agency distributes consumer orders to the center-
factories (depends on the center-factories' delivery delay and it's product's quality, which
are the determinants of his performance). The center-factories order key parts from their
own satellite-factories, and manufacture final products for their customers. The final
products are shipped to consumers through the consumer agency, as shown in the
shadowed area of the "consumer's use period” in Figure 2. Those ill-quality final
products will be "out of work" after the consumer's use period, and then are shipped to
the center-factories for repairing.
604 SYSTEM DYNAMICS '93
ror
| Product
Order
Center-
Factory-1
‘Consumer Consumer Ore | {Centers
Agency hick ‘actory-2
Pi t
Les pea Center-
benniemc Factory-3
Order
Figure 1: System Map
REPAIR
STATION DELIVERY | ORDER
+ 7 |O
= 2] | @r
3 i 3 (o>,
ORDER TO
Center-Factory-1
ORDER TO
TP conter-Factory-2
ORDER TO
Center-Factory-3
Figure 2: Consumer Agency Sector Board
When playing this game, there are four steps for the consumer agency (see Figure 2) :
1. (a) Send orders and the ill-quality products to the center-factories, then take back
the satisfied orders (with it's products) and the repaired products, which were
sent in the previous runs. (b) Calculate the delivery delay of the satisfied orders
and the repairing time of the ill-quality products.
2. Ship products to the "consumer's use period" and move forward respectively all
the "in-using" products. Examine those products that are currently at the repair
stations.
SYSTEM DYNAMICS '93
3. Check those ill-quality products and record the number of the ill-quality
* products. (note: In order to avoid the consumer agency to find out the ill-
products on "consumer's use period” in advance, the final product is
represented by two combined magnets: one is red, produced by the satellite-
factory; another is yellow, produced by the center factory. The "two magnets”
are "closed" together until they are delivered to the "repair station" to be opened
and checked.)
4. Make decisions of the product orders. The objective is to maximize the profits,
which is a function of the delivery time of the products, the delivery time of the
repaired products, and the number of ill-quality products.
There are four steps for the center-factory (please refer to the left hand side of Figure 3):
1. (a) Receive and check the key parts (red magnets) produced by the satellite-
factory. If the ratio of the ill-quality products is higher than the quality control
standard, then all the products of this run could be rejected (also could be
accepted, if needed). (b) Calculate the material costs which are proportional to
the number of those accepted key parts.
2. (a) If one order is satisfied, then sent the satisfied order (and its products) to the
consumer agency, else wait for the next run. (b) Calculate the revenues which
are proportional to the number of delivered products. (c) Repair those ill-
products if needed (note: it would consume its own key parts). (d) Calculate the
repair fees which are proportional to the number of the repaired products,
3. Calculated the inventory costs.
4. Make decisions of the key-parts orders, The objective is to maximize the profits,
which is a function of the revenues, the material costs, the inventory costs, and
the repair fees.
ORDER ph) CH ae) PRODUCTION PRODUCTION
DELAY 2
PARTS ORDE!
<REPAIR DELAY> REPAIR
Figure 3: The Board of the Center-Factory Sector and the Satellite-Factory Sector
606 SYSTEM DYNAMICS '93,
There are four steps for the satellite-factory (please refer to the right hand side of Figure
3): ys
1. (a) Ship the key parts into inventory, and receive those key parts which are
rejected by the center-factory. (b) Record the number of the rejected key parts.
2. Sent key parts to the center-factory.
3. Record the number of the inventories.
4. Make decisions of the key parts production. Since the production capacity is
constrained, there existed trade-offs between the production number and the
products’ quality. The more the satellite-factory produced, the higher the
probability of ill-quality products. The probability function is treated by dices in
the CSS game. Finally, one of the objectives of the satellite-factory is to
maximize his profit, which is a function of the delivered products, the
inventories and the rejected products.
Behaviors of the CSS Game
The CSS Game have been tested by 87 college students and 30 managers. The typical
behavior.of the CSS game could be described by Figure 4 and Figure 5. As mentioned
previously, one center-factory have the opportunity to shorten the delay time (that is,
implementing JIT), while the others remain the same. As shown in Figure 4, since the
delivery time is one determinant of the consumer agency's performance, the direct
consequence of implementing the "JIT option" is to receive more orders from the
consumer agency. In deed, almost all the subjects have perceived. this direct
consequence. They all want to have the this “JIT option".
JIT option
delivery delay
received order
Figure 4: The Direct Consequence of the “JIT Option"
However, there were other indirect consequences compensated the effort of the "JIT
option". As shown in Figure 5, since the center-factory received more orders, the center-
factory will then order more key parts from the satellite factories. The increased orders
could not be satisfied by the constrained capacity of the satellite-factories. The
insufficient parts inventories of center-factory will then increase the delivery delay. —
Moreover, due to the performance function of the satellite-factory and the constrained
capacity, the satellite-factory tends to use "quality reducing" strategy to satisfy the
SYSTEM DYNAMICS '93 607
1. The CSS game's structure,
2. Application in JIT. As mentioned previously, the CSS game is designed to simulate
some general dysfunctional consequences of implementing the JIT technic. The
symptomatic solutions (reduce quality, increase inventory) and the fundamental
solution (satellite factories implement JIT at the same time) are discussed.
3. The consequence thinking skills. Providing some skills, developed by the field of
creative thinking, to help the managers to consider policy's unintended consequences.
4 System's boundary and coordination. In the CSS game, the boundary of the "JIT
option" policy should include the satellite factory and the consumer agency. Based on
these points, participants are asked to reflect the following questions: What is the
"right" boundary while consider a particular policy? What kinds of policies should be
communicated with your suppliers and your customers before implementing them?
5. Deming's management philosophy. Especially focused on two principles: (1) the
product's prices which are not determined by its quality is meaningless. (2) focusing
on the coordination rather than competition between businesses and suppliers (fora
good introduction, see: Aguayo, 1990).
SUMMARY
The coordination in industrial systems should be one of the major challenges for future.
competitive advantages: However, in our opinion, system dynamists had not put enough
efforts to study the industrial "systems". ‘The CSS game introduced in the paper is just a
preliminary attempt to use system dynamics approach to enhance the coordination of
Taiwan's center-satellite industrial systems. Further experiments are needed to study the
effectiveness of the CSS game. Field studies and case buildings should be important
research directions. The organizational learning disciplines organized by Senge (Senge,
1990) will also be considered in our future efforts in this area.
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Aguayo, R. 1990. Dr. Deming: The American Who Taught the Japanese About Quality.
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Forrester, J. W. 1958. “Industrial Dynamics: A major Breakthrough for Decision
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