First Semester

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1 Ali N. Mashayekhi Mehr 1387 Sharif University of Technology Graduate School of Management and Economics System Dynamics for Business Policy Course Schedule GENERAL INFORMATION First Semester Schedule: Sunday and Tuesday 16:30-18:00 TAs: Soheil Ghili, Mohammad Akbarpour, Aref Gharakhani, Nikrooz Nasr, Shima Salehi, Mojtaba Gharibi, Mohammad Mahmoodi, Pouyan Foroughi, Amirhosein Sadighian, Amin Aghajani TA Sessions: The TAs will lead a weekly review session in which they will answer questions and discuss solutions to the due assignments. Time and place of TAs sessions will be arranged later. Grading Emphasis: Assignments: 15% Project: 25% Mid-term exam 20% Final Exam: 40% Each assignment is graded on a 10 point scale. Two points will be forfeited for assignments handed in late. Assignments handed in more than 1 class late will receive no credit. This policy will be strictly enforced. Objectives and Scope This course introduces you to system dynamics modeling for the analysis of socioeconomic and business policy and strategy. Students will practice and learn to think in dynamic terms and over time. They will also learn a system perspective in which they can visualize a socio-economic entity in terms of the structures and policies that create its dynamic and performance over time. System dynamics allows us to create microworlds, management flight simulators where space and time can be compressed, slowed, and stopped so we can experience the long-term side effects of decisions, systematically explore new policies, and develop our understanding of complex systems. We consider the use of systems thinking to promote effective learning. 1

2 The principal purpose of modeling is to improve our understanding of the ways in which a socio-economic entity's performance is related to its internal structure and operating policies. During the course you will use several simulation models to explore the relationship between structure and behavior. In addition through the lectures and exercise we will examine the use and reliability of forecasts; growth and decays of cities; public policy and natural resource management; and the rationality of business decision making. Students will learn to recognize and deal with situations where policy interventions are likely to be delayed, diluted, or defeated by unanticipated reactions and side effects. You will have a chance to use state of the art software for computer simulation and gaming. Assignments give hands-on experience in developing and testing computer simulation models in diverse settings. Text and Software The primary text is Sterman, J. (2000). Business Dynamics: Systems Thinking and Modeling for a Complex World. Irwin/McGraw Hill. ISBN Several excellent packages for system dynamics simulation are now available commercially, including ithink, from High Performance Systems, Powersim, from Powersim Corporation, Professional DYNAMO, from Pugh-Roberts Associates, and Vensim, from Ventana Systems. You may wish to learn more about these packages, as all are used in the business world, and expertise in them is increasingly sought by potential employers. For further information, see the following resources: ithink: See the High Performance Systems web site at < Powersim: See the Powersim web site at < Professional DYNAMO: Contact Pugh-Roberts Associates, 41 William Linskey Way, Cambridge, MA 02142, 617/ Vensim: See the Ventana Systems web site at < In this course, we will be using the Vensim Personal Learning Edition (Vensim PLE), a FREE package offered by Ventana Systems. Vensim PLE comes with on line user s guide and help, and also a folder of demo models. Download Vensim PLE from the Vensim web site at < 2

3 Course Schedule: (Subject to change) 1 Tuesday 87/6/26 2 Sunday 87/6/31 Introduction and Overview: Dynamic perspective; system thinking; process of understanding and managing the real world, course outline and term s Models: Definition and categories; The modeling process Reference mode Read Business Dynamics [BD], Ch. 1. Read BD, Ch. 3, Ch. 4 #1 Pick a SD paper No. Date Topic Reading Assignment Out Assignment Due 3 Tuesday 87/7/2 A theory of structure for systems: Closed systems or Feedback System; Feedback loops, stock and flows, auxiliary variables, and information links Dynamic hypothesis #2 #1 4 Sunday 87/7/7 5 Tuesday 87/7/9 6 Sunday 87/7/14 7 Tuesday 87/7/16 System Dynamics Tools: Mapping stock and flow structure of systems Read BD, Ch. 6 (Skim sections 6.2.7, 6.2.8, 6.2.9, 6.3.4, 6.3.6) #3 #2 Discussion: Problem Set #2 Read BD, Ch. 7 Term System Dynamics Tools: Causal loops diagram System Dynamics Tools: Linking feedback with stock and flow structure 8 Sunday Mathematical equation and model simulation Read BD, Ch. 5 (Skim sections 5.4, 5.6)Read Doman et al. 1995, Dynamics of managing a life insurance company Read BD, Ch. 8 (sections ) Read Vensim manual definition #4 #3 Problem definition 3

4 87/7/21 of your 9 Tuesday Structure and behavior of Read BD Ch. 4: 4.1.1, #5 #4 87/7/23 simple dynamic systems: 4.1.2, Exponential growth Goal seeking S-Shape 10 Sunday Discussion: Problem Set #3 87/7/28 11 Tuesday 87/7/30 12 Sunday 87/8/5 13 Tuesday 87/8/7 14 Sunday 87/8/12 Tuesday Structure and behavior of simple dynamic systems: Delays Structure and behavior of simple dynamic systems: Overshoot Oscillation Non-Linear Systems and Modeling Growth Processes Growth Strategies Part 1: Modeling Innovation Diffusion and the Growth of New Products Read BD 4.2.2, 4.1.3, Ch. 9.1 (Skim 9.1.2, 9.1.3) Skim BD, Ch. 9.2 Read BD, Ch. 9.3 (Skim sections end) Dynamic hypothesis of your #6 #5 Conceptualization of your Distribution system game #7 #6 87/8/14 15 Sunday 87/8/19 16 Tuesday Growth Strategies Part 2: Positive Feedbacks in the economy, path dependence, and the engines of growth Mid-term exam Read BD Ch. 10 (Skim section 10.2) 87/8/21 17 Sunday 87/8/26 18 Tuesday 87/8/28 Why Build Models: Re- Engineering the Supply Chain in a High-Velocity Industry Managing Instability Part 1: Formulating and testing robust models of business processes 19 Sunday 87/9/3 Managing Instability Part 2: The Supply Line and Supply Chains 20 Tuesday Managing Instability Part 3: Forecasting and Feedback: Read BD, Ch. 11 #8 #7 Read BD, Ch. 12 (Skim section 12.6) Read BD, Ch Read BD, Ch. 16 Read Paulos, Your model formulation #9 #8 4

5 87/9/5 Bounded Rationality or Rational Expectations? Recession forecast if steps not taken 21 Sunday 87/9/10 Managing Instability Part 4: Hog bellies, oil tankers, and business cycles Read BD, Ch end 22 Tuesday 87/9/12 23 Sunday 87/9/17 24 Sunday 87/9/24 25 Tuesday 87/9/26 26 Sunday 87/10/1 27 Tuesday 87/10/3 Applications of System Dynamics: On Time and Under Budget Dynamics of Project Management Applications of System Dynamics: Process Improvement in the semiconductor industry Applications of system dynamics to management of natural resources and public policy issues Applications of system dynamics to management of natural resources and public policy issues Interactions of Operations, Strategy, and Human Resource Policy: People Express Truth and Beauty: Model testing and the process of building confidence in models Read BD, Ch 2.3 and Smith et al., Death of a Software Manager Read BD, Ch Stata, Organizational Learning: The Key to... and Kaplan, Analog Devices: The Half Life System Read Meadows, et. al., Groping in the Dark: The First Decade of Global Modelling (excerpts), Meadows, Global Citizen selections Read Meadows, et. al., Groping in the Dark: The First Decade of Global Modelling (excerpts), Meadows, Global Citizen selections People Express (A) People Express clippings Read BD, Ch. 21 and 22. Read Homer, 1996, Why we iterate... Simulation of your #10 #9 Policy analysis of your #10 28 Sunday Distribution system game #7 #6 87/10/8 5

6 List of assignments: 1. Problem definition In this assignment students should determine important variables in a Phenomenon, Plot behavioral trends, determine desired trends and finally propose policies for improving the condition. 2. Stock and Flow In this assignment, students identify whether a variable is a stock or flow. Also they should plot the behavior of a stock when its rate changes. 3. Causal Loop and Dynamic Hypothesis In this assignment Students should determine causal loop diagrams in a paper about Negroes. Also in another part they should write a dynamic hypothesis about how contagious disease spread in a school. 4. Introduction to Vensim ( SIR Model ) This assignment has adopted from MIT system dynamics course assignments. Students should formulate and complete SIR model. Also they should analyze the S-shaped behavior of model. 5. Population model and limit to Growth This assignment has two part, at first students should build a simple model for a country population. In second part they should complete the model when there are only limited resources. 6. Modeling Macroeconomics In this assignment, students should build a macroeconomics model, in which They will test effects of different governments expense policies on national yield. 7. Behavior of Delay In this assignment, Students learn about delay structure and different delay types. We have used a simple Inventory model for this reason. 8. Oscillation in this assignment, student learn about structure of oscillation. For this reason We have used Workers- Inventory Model. 9. Archetype (Optional) An optional assignment about building casual loop diagram and Flow diagram for specified archetype 10. Complex Model Building In This assignment, students should exploit all of the skills they have learned. We have not selected this assignment yet. Term Project: You should pick a dynamic problem and build a model to analyze it. We will give you a list of system dynamics papers. Each group of two students should pick one paper. We will give you the paper that you pick. Each group should analyze and criticize different parts of the paper as we proceed in the course and use the paper as a base to define, model, and simulate the problem of its term. You should hand in your term in several stages as is identified in the course schedule. 6