Reflections on
System Dynamics
Asset Stock Coordination, Performance and the
Role of Information
Keynote Talk for PhD Colloquium
International System Dynamics Conference
St Gallen, Switzerland July 2012
John Morecroft
London Business School
Outline
Inventory-Workforce model and cyclicality
Coordination and performance in manufacturing
firms
Operating policy, information and bounded
rationality
A sample of projects – MIT, London and Brazil
The Inventory-Workforce Model
Source:Mass NJ and Senge PM 1975. Understanding Oscillations in Simple Systems, MIT System Dynamics Group Working Paper, D-2045-2
(available from the System Dynamics Society on a DVD containing the complete D-memo series of the MIT System Dynamics Group).
Overview of a Manufacturing Firm
Source: A Systems Perspective on Material Requirements Planning by John Morecroft, Decision Sciences 1983.
Information Flow Comparison of
Order Point and MRP Methods in
Material Control
Source: A Systems Perspective on Material Requirements Planning by John Morecroft, Decision Sciences 1983.
Order Point versus MRP in Rival
Manufacturing Firms
Performance Comparison in Materials Control
Order Point
MRP
Raw material order rate
Sub-assembly schedule
Raw material order rate
Sub-assembly schedule
Master schedule of production
Master schedule of production
Unexpected 10 percent increase in customer demand, year 1
Source: A Systems Perspective on Material Requirements Planning by John Morecroft, Decision Sciences 1983.
Order Point versus MRP in Rival
Manufacturing Firms
Performance Comparison in Labour Management
Order Point
MRP
Productivity
Productivity
Direct labor
Direct labor
Overtime
Overtime
Unexpected 10 percent increase in customer demand, year 1
Source: A Systems Perspective on Material Requirements Planning by John Morecroft, Decision Sciences 1983.
Operating Policy, Information and
Bounded Rationality
Asset Stock
1
Operating
Policy
Information
2
3
4
5
FIVE FILTERS
1. People’s cognitive limitations
2. Operating goals, rewards and
incentives
3. Information, measurement
and communication systems
4. Organisational and
geographical structure
5. Tradition, culture, folklore and
leadership
From Chapter 7 of Strategic Modelling and Business
Dynamics by John Morecroft Wiley 2007.
A Sample of
Applied Research Projects
Growth Management (Market Growth Model
and Variations): Bio-Tech Startup
Dynamics of Strategy: McKinsey and Goodyear
Back to Cyclicality: Romeo and Juliet in Brazil;
Shell and the Global Oil Producers
Current Project
Stocks to
Coordinate
Asset Stock Coordination
and Sustainability
Regional Fishery
Global Industrial Society
Fish
Ships
Natural Resources
Population
Capital
Capital in Agriculture
Pollution
To learn more, attend my workshop on Thursday July 28
‘Metaphorical Models for Managing the Transition from
Industrial Growth to Sustainability’
Related Publications
Asset Stock Coordination and Firm Performance
Gary MS, Kunc M, Morecroft JDW and Rockart SF. 2008. System Dynamics and
Strategy, System Dynamics Review 24(4), 407-429.
Kunc M and Morecroft JDW. 2010. Managerial decisionmaking and firm performance
under a resource-based paradigm, Strategic Management Journal, , 31(11), 11641180.
Morecroft JDW. 2009. Resource Coordination and Firm Performance: A System
Dynamics View, 3-22 in Strategisches und operatives Produktionsmanagememt (a
Festschrift honouring Peter Milling, editors Strohhecker and Grossler), Gabler
Research.
Warren KD. 2008. Strategic Management Dynamics, Chichester: Wiley.
Bounded Rationality and Misperceptions of Feedback
Morecroft JDW. 1985. Rationality in the analysis of behavioral simulation models,
Management Science 31 (7), 900-916.
Sterman JD. 1989. Misperceptions of feedback in dynamic decisionmaking,
Organizational Behavior and Human Decision Processes 43 (3), 301-335.
Manufacturing Dynamics
Morecroft JDW. 1983. A Systems Perspective on Material Requirements Planning,
Decision Sciences, 14 (1), 1-17.
Inventory-Workforce Equations
Inventory(t) = Inventory(t - dt) + (Production_Rate - Sales_Rate) * dt
INIT Inventory = 4000 {refrigerators}
Production_Rate = Workforce*Productivity_Per_Man {refrigerators/week}
Sales_Rate = Exogenous_Sales_Rate {refrigerators/week}
Workforce(t) = Workforce(t - dt) + (Hire_Fire_Rate) * dt
INIT Workforce = 200 {workers}
Hire_Fire_Rate = (Desired_Inventory - Inventory)/(Inventory_Adjustment_Time *
Productivity_Per_Man * Workforce_Adjustment_Time)
Desired_Inventory = 4000 {refrigerators}
Exogenous_Sales_Rate = 1000*NORMAL(1,0) + STEP(100,10) + RAMP(0,10)
{units/week}
Inventory_Adjustment_Time = 12 {weeks}
Productivity_Per_Man = 5 {refrigerators per worker per week}
Workforce_Adjustment_Time = 8 {weeks}