Chapter 1 PDF

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CHAPTER 1: SYSTEMS MODELLING - WHY AND HOW?

The very essence of science is the explanation of what we find around us and laying bare the
fundamental mechanisms of nature (Waldrop, 1994), but modelling goes far deeper than
scientific abstraction. Rather it is a skill vital to any living organism learning to survive
through adaptation. Most of the models we humans build are in our minds (i.e. mental
models) and are just as much models as the ones that are the subject of this book. They just
aren't particularly explicit unless we happen to articulate them, and building simulation
models is but one example of such articulation. Models are conceived in the heads of their
builders, are born and made explicit on paper and computers, and expire when we throw them
away for something better1.
Such modelling is useful because there is a pretty small and finite limit on what our minds
can handle at once. By formalising our mental models and building explicit models of them,
we can consider more of the various entities in the system we are studying and more of the
interactions between them i.e. we gain in both scope and detail. Also, we can do more with
such models than just predict in order to survive; we can start to describe and (most difficult
of all) explain too. Indeed, description, prediction and explanation are three (related)
purposes for which models can be used (Flood and Carson, 1993). Description is the most
straightforward; based on observation, we simply construct models which mirror reality.
Prediction involves more, namely using such models to predict future behaviour, accepting
(usually implicitly and often dangerously) the intuition that past behaviour is a good guide
(Casti, 1994). Explanation, though, transcends both, and this indeed is the essence of science.
Whether a given model needs to be "explanatory rather than merely predictive" (Rivett, 1972)
of course depends on the purpose of the work that it is supporting.
More importantly perhaps than purpose, though, explicit models can conveniently be
classified into two major groups i.e. physical and abstract. The former is further divisible into
iconic or scaled models (such as model aeroplanes in wind tunnels) and analogue (models
having different properties); the latter can be divided into analytic (comprising formulae and
variables related by equations) and numeric models (rule based). Lastly, models can be static
or dynamic (depending on whether they vary with time) and then stochastic (with
randomness or probabilities) or deterministic (without). This leads to the two broad areas of
dynamic modelling: discrete simulation and system dynamics. These two categories form the
bulk of our subject.
This introductory chapter should enable you to:
understand the motivations behind modelling systems - the philosophy and its context
deal with complexity using rich pictures, cognitive maps and influence diagrams
start thinking about perspective, scope and level of detail
choose between discrete simulation and system dynamics in particular situations.
1.1 THE SYSTEMS APPROACH AND HOLISM

At the core of building good models in operations management and the management sciences
is the systems approach. This has a critical role because of three fundamental features.
1
See also the ideas of Popper, particularly on falsification e.g. In our Time, February 2007.
Andrew Tobias 2015/16
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1. It recognises systems as wholes - unlike the reductionist approach, which presumes that
understanding is best obtained by breaking the wholes down into their constituent parts.
Ackoff (1993) commented that it can be proven rigorously that when each part of an
organisation improves its performance independently of other parts with which it
interacts, the performance of the whole may well suffer. This follows from the fact that
the performance of a system is not the sum of the performances of the parts taken
separately, but is the product of their interactions.
2. It considers organisations as open systems in constant interaction with their environment.
3. It is naturally comprehensible because human beings organise their knowledge into
cognitive systems spontaneously (Jackson, 1991).
In any model building, though, it is necessarily impossible to include all the elements of a
given situation: there are too many and the interactions between them are too complex. The
trick is thus to recognise the elements and their interactions not completely but adequately:
this is often far from straightforward to achieve. Particularly in the early stages of modelling
(Clarke and Tobias, 1995a; 1995b) we need ways of dealing with complexity (Flood and
Carson, 1993) and to recognize why we are doing it. As illustrated in Figure 1.1 we will be
hoping that, through informed discourse and debate, our modelling - and more generally,
problem structuring and analysis will result in rational decision making and interventions,
and hence outcomes that are desired and somehow make the world a better place.
1.2 DESCRIPTION, METAPHOR AND ANALOGY
The approach in much management research is just to describe. Situation descriptions are
framed in long and complicated textual terms, and are intended to provide a complete
coverage of every possible feature of the situations without quantifying many (if any) of the
properties involved. Indeed some organisational models do little more than describe or
depict (Burke and Litwin, 1992). The trouble is that assessments of particular real situations
against such models tend to be at best debatable and at worst arbitrary.
More succinct than descriptions are metaphors, and these differ from analogies and from
similes. Analogies reflect correspondences between things in certain respects that are
otherwise different (Chambers Etymological English Dictionary) - e.g. Money is like
muck, not good unless it be spread (Fowlers Modern English Usage). Unlike similes (which
are comparisons proclaimed plainly as such), metaphors are, in conversation at least, mere
figures of speech based on comparisons that are tacit - e.g. He is a tiger when roused
(Chambers).
In management though, metaphors tend to assume the role of models and the use of
metaphorical analysis in discussing organisational change has long been widespread (Grant
and Oswick,1996; Palmer and Dunford, 1996). The "organisation as machine" metaphor can
actually be traced back to Taylor (1911) but more recent studies tend to rely upon studies of
biological systems for insights into the management of organisations (e.g. Waldrop, 1994).
Indeed it has become popular, when attempting to understand almost anything in
management, to refer to the animal kingdom (e.g. Collinvaux, 1978).
Political Discourse, Negotiation, Consultation

Informed Public Debate, Critical Scrutiny
amongst Diverse Interest Groups
Coherent/Sound/Rational
Policy Choice, Decision Making,
Commitment and Interventions with
Popular Support and Consensus
Multi-Perspective/Participative/Transparent/Enabling
(..merely apolitical/technocratic/controlling)
Problem Structuring, Modelling and Analysis
.. Value Assertions and Retreat from Reason
Desired Outcomes meeting public..(sectional) interests

.. Unintended Consequences, Administrative/Political
Chaos, Inequity, Controversy and Divisiveness
Comprehensive or Representative
(..selective) Evidence
.. Anecdotes/Doctrine/Ideology
Surveys, Studies
and Research
Complexity/Inter-Connectedness
Uncertainty & Contending Priorities
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Figure 1.1: Systems Thinking as an Approach to Problem Solving Interventions2
Following standard convention, the directed arrows mean leads to; the double dot symbol (..) is shorthand
for rather than or as opposed to.
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The use of analogy and metaphor is attractive, particularly to people struggling to make sense
of their own surroundings. It is often easier to make sense first of a parallel environment in an
objective way (which most engineers at least would agree to be 'better than' subjectively) and
then read across to their own situation by pairing up seemingly unique specialist activities,
players, tenets and jargon, with someone else's. This approach (a form of modelling, after all)
appeals especially to intellectuals (in the widest sense) who like spotting patterns (that's what
generic research is isn't it?) and nothing better than a good stab at grand unification theory.
And of course metaphors can never be scientifically falsified (Pinder and Bourgeois, 1982).
Using analogies is thus a very effective way of challenging the status quo; they are also
concise and relatively easy to communicate.
However, any analogy brings with it excess baggage (there's a hidden metaphor, see?!) that
doesn't necessarily read across and may be based on quite different tenets. The trouble is that
buying into them (theres another) leads to mistakenly imposing inappropriate solutions
without proper justification and also to getting premises and alternative paradigms accepted
by the back door (a third), such as in the misguided Health Service reforms of the 1990s
(Rosenhead, 19923). Equally unfounded is the contemporary acceptance of the company
model (with its focus on customers etc) as a panacea for the ills of the entire British public
sector. How infinite, wrote Sir Winston Churchill, is the debt owed to metaphors by
politicians who want to speak strongly but are not sure what they are going to say.4
1.3 SCOPE AND LEVEL OF DETAIL
Given what we are trying to achieve instead, how do we actually build proper models? Well,
simulation literally means "mimicry, and in some instances it is realism that matters. The
most obvious examples are flight simulators and most of these are marketed specifically on
the basis of realism.
Microsoft Flight Simulator 2000, for example, was promoted to be as real as it gets. It
offered the home enthusiast an amazing range of aircraft to fly throughout its virtual world as
in Figure 1.2; limited hardware (including yokes and rudders of the type shown in Figure 1.3)
was also readily available at low cost. The technology of the day for training commercial and
military pilots was of course even better.
In discrete simulation and system dynamics, though, the trick is not simply to create an
artificial copy of the system under study. We are motivated by wanting insight and
understanding (rather than skill or expertise) and so must concern ourselves with
simplification and abstraction (not just realism). Furthermore we are usually more interested
in the behaviour of the system as a whole rather than in that of its components. In model
The title of the sixth section Retreat from Reason is presumably a reference to The Age
of Reason by George Washingtons propagandist Thomas Paine (1737-1809). See also
Paines Rights of Man and Common Sense (against hereditary monarchy) as described
by Melvyn Bragg in the series Radical Lives.
4
Note equally how a conjecture can be dressed up as a dead certainty with enough rhetoric,
and protected against dissent with enough threatening language. But finally it has to meet the
test of science: that any theory must match the facts, and the facts cant be altered to suit the
theory. Clive James Point of View, BBC Radio 4, 23.10.09
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building, we therefore need to take account very carefully of whatever connectedness and
interactions are at play but without including absolutely everything.
Figure 1.2: Starboard View from Cessna 182S over Sydney Kingsford Smith Airport
(Microsoft Flight Simulator 2000 Professional Edition)
Figure 1.3: Flight Simulator Pedals and Yoke (from CH Products)
One particularly fascinating case demonstrating a few important concepts is the Model
Village at Bourton-on-the-Water in the Cotswolds District of England. Built in the 1930s it is
a scale model in stone of the entire village of Bourton, filling the garden of a pub. Visitors are
able to walk along the path-sized roads past dolls-house buildings at waist or knee height
depending on age.
The most discerning of them will wonder at two special features. Most interestingly, there is
recursion, in that behind the model of the pub buildings lies (of course) a model of the pub
garden and, yes, in it, a model of the very model village itself. This model contains another
model in turn, down to the fourth and final model measuring the size of a shoe box and
having houses less than a half inch high. Furthermore, because of the garden's shape and
orientation within Bourton, the model village is aligned at 90 to the village itself and this can
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be quite disorienting. Successive models are then aligned (necessarily) at 90 to the model
one recursion higher, so that the smallest is again aligned with Bourton itself.
Not only does the Model Village demonstrate recursion and mapping, scope and level of
detail are also major issues. Whereas foot-high lampposts line its roads, lampposts are
excluded from the smaller models; windows and doors appear in all but the shoebox sized
model. The scope of all the models is therefore the same (each covering the whole of the
village) but the chosen levels of detail differ, with the shoebox sized model being the least
detailed of all.
Figure 1.4: Model Village at Bourton-on-the-Water
The shape of the garden and the practicalities of stonemasonry largely dictated these choices,
but in such modelling as computer simulation, choosing the most appropriate scope and level
of detail are among the trickiest aspects. Another difference is that in each one of the village
models, the level of detail is uniform. For example, if windows are included in a given model,
they are included throughout it. In computer simulation, though, more detail can be included
in some areas than others to reflect both where our interests lie and whether including
something will make any significant difference to the answer. The trouble, of course, is that
you can't be certain whether something will make a significant difference until you try it; in
one sense it is then too late anyway, so in practice model builders rely largely on intuition and
limit formal sensitivity analysis to investigating just a few key factors. Unfortunately
intuitions can easily be wrong (Casti, 1994). This goes for models too.
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1.4 MUDDLES DRESSED AS MODELS
In fact the literature of management and its many sub-fields is awash with that are routinely
and misleadingly presented as models. Yes they often are indeed such but only in the most
limited of senses, and all too many give the impression of clarity and precision where in fact
there is muddle and vagary. There are variations of at least four basic forms (Walker and
Tobias, 2007).
The first of these, as caricatured in Figure 1.5, will be found to show the various aspects or
elements represented by words that are connected by lines or arrows. Unfortunately such
presentations widely fail to recognise the very special significance of lines and arrows in
systems modelling i.e. that they respectively indicate connectedness and dependence. In far
too many examples of this type, every element will be connected directly to every other. This
reveals only that its author has been unable to disentangle the web. The model is no more
than a list of items that might or might not have an effect and anyway the items themselves
are all-too-often self-evident and the model itself presented without any proper validation.
Figure 1.5: Models drawn as Words and Arrows (wjnyi, fxtaz etc being functions, processes,
or other items, relevant but nonetheless unquantified and vaguely defined).
wjnyi
uotyq
fxtaz
ymbrv
pwhcu
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A second form favoured at a less enlightened stage by no less than the author himself
(Bache et al, 1987) is that of Figure 1.6 i.e. a series of concentric circles or ovals
(sometimes offset) with the elements placed variously within them. Seemingly more
important elements will lie towards the centre and more peripheral ones towards the edges.
In this way such layouts thus imply a hierarchy of importance. Confusingly, though, the
environment will usually appear somewhere beyond the outermost circle or oval, implying a
hierarchy of containment i.e. that central items are part of the outer ones. So which is it?
The two interpretations are in conflict and we can never be sure.
Figure 1.6: Models drawn as Words in Offset Ovals
yqzpo
jepmqr
wtxhj
pydfr
tcxai
kmzbe
Environment
As caricatured in Figure 1.7, the third type of model plaguing contemporary management
research comes in the form of a triangle - or even, for those misguidedly attempting to think
in three dimensions, the pyramid. The general implication with these is that the thing is in
some vague but undefined way hierarchical: the items at higher levels are both fewer in
number and also superior to those that are lower down and more numerous. Arrows parallel
to the one or both of the sides might indicate this explicitly (an unnecessary replication) or
even be used to enrich the description with different variables (an often inconsistent
complication). More fundamentally, though, the trouble is that such representations do
nothing to clarify either the nature of the interactions between the items at each level or
indeed the sequences in which these occur. Whilst giving the impression of deep insight, such
models are in fact shallow and fail to represent anything beyond the most simplistic view
of the systems that they describe.
As if these three cause little enough confusion alone, the fourth and final type of model is,
as illustrated by Figure 1.8, in the form used in engineering for critical path analysis or the
description of control systems i.e. boxes containing text with single-headed arrows to
indicate, not an undefined level of dependence, but some sort of flow usually of
information. Sometimes they even masquerade as top-level system designs whereas in
reality they offer no clarity beyond presenting one possible view that, without justification, is
then accepted ahead of all others. In this sense they are perhaps the most dangerous of all.
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Figure 1.7: Models drawn as Triangles or Pyramids
knlno
firb
n
tyq
asdpkj
ynnev
Figure 1.8: Models drawn as Words in Boxes
wtapv
hgayq
yizbn
But whatever the combination of words, arrows, boxes and triangles, the trouble is that, as
Lord Kelvin is reported to have said according at least to Kraus (1991), "when you can
measure what you are speaking about and express it in numbers you know something about
it; but when you cannot measure it, when you cannot express it in numbers your knowledge is
of a meagre and unsatisfactory kind; it may be the beginning of knowledge but you have
scarcely progressed in your thoughts to the stage of stage of science whatever the matter
might be". So the sorts of muddles above are no good. To become genuine models, every
word, line and arrow seems to be properly articulated a fundamental feature of input-output
analysis (e.g. Wu, p38).
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1.5. INPUT-OUTPUT ANALYSIS

There is little more to input-output analysis than specifying (a) what is needed to complete a
particular process i.e. the inputs, and (b) what results or emerges from it i.e. the outputs. In its
simplest form the method is thus laughably trivial as illustrated in the upper half of Figure 1.9
a single process with one input and one output (either of both of which can be vectors).
However it becomes immensely powerful when several input-output analyses are linked
together to form sequences or networks. The less important items within each category may
sometimes be identified as being only complementary, and others as specifically for either
control or monitoring. Hearing grown professionals hotly debating whether something is an
input or an output is a relatively frequent embarrassment that can beggar belief. But of course
such arguments miss the point: one persons input can easily be anothers output, and
labelling an item as one or the other is meaningless without the attendant process being
specified too.
Figure 1.9 Inputs, Processes and Outputs
Input
Process
Output
For example take track wear data as illustrated in Figure 1.10. To one individual within the
maintenance division this might simply be something that gets measured during the process
of track inspections: an output. But to an immediate colleague producing a inspection
schedule it is something that has to be taken into account: an input. And of course the whole
thing is circular: the schedule then drives the inspection process.
Figure 1.10 Input Output Analysis Track Wear Maintenance
Inspection
Schedule
Track wear data
Planning
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1.6 USING RICH PICTURES TO SUMMARISE SITUATIONS
Among the more accessible methodologies for dealing with complexity, rich pictures are
ideally suited for modelling messy situations, i.e. ones that include soft items (such as
issues, conflicts and problems) as well as the usual hard ones (like sales figures, profits and
employee numbers). All of the important features, relationships, interconnections and the
resulting direct and indirect consequences are summarised in a single diagram and they are
rich in the sense that they are intended to show everything. Also they can help unify differing
so called Weltanschauungen or world views e.g. whether CERN is a particle physics
laboratory near Geneva (the physicists view) or in fact an experiment in multinational cooperation (that of the sociologist).
In general terms note that rich pictures should be
Cartoon/Diagrammatic (rather than purely textual)

Situation summary (NOT system description)
Big / freehand
Used for communicating situation to others.
The main steps in producing rich pictures should be

1. Identify system boundary, components, subsystems and structure, transformation
processes, inputs and outputs
2. Draw key system elements (icons) and annotate
3. Link connected items - showing relationships, cause and effect (influences), symbioses
(close associations), precedences, processes. Remember there is no need to link
everything to everything else.
4. Validate with client / other players.
To demonstrate, suppose that we are asked what is wrong with Britains railways? Beyond
replying Britains roads (and no more) but resisting the temptation to write yet another
book on what is undoubtedly a hugely messy situation, the rich picture of Figure 1.11
provides a concise summary. Note its adherence to the typical features listed above and how
the emphasis is upon symptoms rather than underlying causes.
More generally, rich pictures give deeper understanding of complex situations and are a
useful first step in process of building models. They are highly successful as a medium for
communication, mainly because they hold the contributors interest from the start of the
interaction, while their non-technical nature often results in more information being made
freely available. Also, the participants are able to see their personal contribution to the
structural representation and this fosters interest, establishes ownership, encourages
implementation and adds credibility to the results. One of the earliest stages of any soft
systems analysis should therefore be to construct a rich picture on the basis of meetings and
interviews of various stakeholders. Often a different rich picture can be developed for each
participant and these are then superimposed and combined into one overall representation of
the big picture. Any contradictions between the representations are then investigated with
the help of the participants and resolved. The final version will often be useful in
subsequently producing cognitive maps and influence diagrams.
Empty
promises
The Rt Hon
Minister is
AXEING our
railways!!!
Low profits for

rail companies
forecast
Privatization,
Regulation &
Targets
200
please
.
Ticket
Pricing
This is going
to cost
BILLIONS!!!

- I blame
Beeching!!!
A 2000
season
ticket, and
I am forced
to STAND!
This is much
quicker AND
cheaper!
Rail Freight
Competition
Crowding
& Crashes
Poor
Punctuality &
Reliability Weather
Old Network &

Rolling Stock
- HOW
much?!
Forgotten
us, have
you?
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Figure 1.11: Rich Picture: Whats Wrong with Britains Railways?5
Simplification of an original by Tom Lawrenson, MEng Birmingham, 2008. Note how here, each arrow
implies cause and effect (or similar) but that, more generally, arrows are by no means essential throughout rich
pictures.
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1.7 IDENTIFYING PROBLEMS WITH COGNITIVE MAPS
The purpose of producing cognitive maps is specifically to identify the problem(s) in the
situation that is under study (Eden, Jones and Sims, 1983; Eden, 1988). Such maps are
cognitive - in the sense that they reflect the mindsets of the problem owner's and/or
players
maps - by dint of being diagrammatic .. (rather than) purely textual
inexact because there is no single 'correct' version.
They are produced in four steps.

1.
2.
3.
4.
Break down the problem description(s) into isolated issues, goals, concepts, solutions etc.
Pair up any opposing items so that meaning is partly retained through contrast.
Draw map linking connected items so that meaning is also retained through context.
SHAPE so as to reveal problem structure, often including feedback loops.
Our example in Figure 1.12 reminds us that to believe the rhetoric about getting people out
of their cars is nave: history demonstrates that the real priority of any government is simply
the retention of political power and, at least in Britain, most governments have sought to
achieve this by reducing (or at least promising to reduce) taxes. Private and corporate wealth
has soared but at the expense of the public sector. To survive, the rail industry has had no
strategic alternative since Beeching (1963) but to retrench.
Figure 1.12: Cognitive Map: Whats Wrong with Britains Railways?
Retain Power
GOVERNMENT
Minimium
Taxes
Maximize
Personal Wealth
Retrench / Contract
(.. Diversify / Grow)
PUBLIC
Use Cars
RAIL INDUSTRY
Survive
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1.8 STARTING TO MODEL USING INFLUENCE DIAGRAMS
Influence maps are not specific representations of any material or information flows between
the business system components and do not attempt to depict the sequence in which the
systems activities operate. Rather, they depict those aspects of the system, which directly or
indirectly influence the performance criteria i.e. they show how things work. In measuring
corporate performance the most common such criteria will be sales revenue, market share,
earnings, sales volume and production costs. This means that an analyst could represent all
the factors influencing a companys market share, sales volume or even the production
process quite effortlessly. The factors which should be included in the influence map can be
identified by assessing the rich picture for the key variables (including controllable variables,
their controllers and uncontrollable variables) influencing the system of concern, and the
interrelationships between these variables.
Arrows are added to show the direction of influences and some indication of their magnitude
may be given by their thickness. Also, plus and minus signs show the relative movement of
each of the variables, e.g. if punctuality and reliability increases so will customer satisfaction,
but as weather conditions worsen, punctuality and reliability decreases. Where an increase
(decrease) in the influencing variable leads to an increase (decrease) in the influenced
variable, then a plus sign is attached to the arrow. Conversely, where an increase in the
influencing variable leads to a decrease in the influenced variable, or vice versa, negative
signs are attached. This follows the normal influence diagram convention. Other influence
map conventions including clouds (which depict inputs from the environment or wider
system which are uncontrollable), rectangles (which depict control or decision inputs), circles
(which depict system variables) and ovals (which represent outputs and system performance
measures) can also be used.
The main steps in producing influence diagrams should thus be:
1. Start from Rich Picture (and Cognitive Map, if appropriate).
2. Formalise notation i.e. circles (system variables), clouds (uncontrollable inputs),
rectangles (control inputs / decisions) and ovals (system outputs / performance)
3. Show directions of +ve or -ve influence.
4. SHAPE so as to reveal system structure.
5. Validate with client.
6. Use for building the SYSTEM MODEL.
In our continuing investigation into whats wrong with Britains railways we might come
up with something along the lines of Figure 1.13. Excluding any wider consideration of such
items as the strength of the economy and the general demand for travel and transport, it
reflects the supposition that demand is influenced principally by the price of tickets and
freight movement relative to the those using other transport modes. To meet this demand the
industry can notionally assign some proportion of its available capacity; but of course the
higher this load factor the greater the crowding, the likelihood of delays and the risk of
accidents which in turn will tend to dampen demand. Expenditure on renewals,
maintenance and new investment will be limited to whatever is left over from the fares and
freight income after the running costs have been taken out.
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Figure 1.13: Influence Diagram: Whats Wrong with Britains Railways?
Cost of Motoring,
Haulage and
Air Transport
+
-
Crowding,
Punctuality
and Accidents
Freight and
Passenger
Demand
+
Load Factor
+
Capacity
Available
Capacity
Used
Freight and
Passenger
Load
Running
Expenditure
Chargeable
Journeys
+
Renewal,
Maintenance &
Investment
Expenditure
Degree of
Asset
Sweating
Fares and
Freight
Income
Subsidy
Ticket and
Freight Prices
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1.9 SOFT SYSTEMS METHODOLOGY
Checkland and others (Checkland 1981, 1992; Checkland and Scholes 1990; Rosenhead
1989) developed SSM as a reaction to traditional systems engineering, which generally
involves the selection of an appropriate means to achieve an end which is defined at the
start, known to be desirable, and thereafter taken as given. They asked themselves what if
determining objectives, and defining the problem are part of the problem?
They recognised that hard systems thinking behind systems engineering tends to fail when
applied to messy problems such as are found in human activity systems where
individuals are autonomous, and their naturally varying world views are coloured by power,
politics and personalities. So they invented SSM: a cyclic/participative/systemic process of
learning that leads via enquiry and debate to shared perceptions and hence agreed
purposeful activity aimed at improvement. The specialised vocabulary is a little daunting
and the details are not covered further here, but the three (out of seven) stages of the approach
which are at its core are in fact beautifully simple:
Develop one or more so-called root definitions of the system in terms of its Customers,
Actors, Transformation Processes, Weltanschauung, Owners and Environmental
constraints (usually remembered using the mnemonic CATWOE);
Based on these root definitions, build conceptual models of the system, specifying for
each one (in the generalised form of Figure 1.14 as described below) what must
necessarily happen if the corresponding root definition is to be valid;
Compare conceptual model with real world to expose the inconsistencies.
The power of the approach arises from the contention that it is general: identify the
CATWOE for any given human activity system, and both the root definition and what should
be happening then follow necessarily. The example in Figure 1.14 is deliberately nonsensical
so as to demonstrate this.
Suppose we are interested in a gor (Customer) tonking system in which tonkers (Actors) tonk
gors (Transformation) assuming that gor tonking is good (Worldview); it is dag-Owned and
operated within constraints dods (Environment). This wording constitutes the so-called root
definition and leads directly to the model shown in Figure 1.14, which we can then compare
against what is actually happening. Because this is all general we can build root definitions
and models of real systems in the same way just by substituting the gors and tonkers etc with
relevant CATWOE.
Soft Systems Methodology hence provides a means for the formal specification of messy
systems including organisations. This makes it exceptionally useful for assessing system
designs without resorting immediately to numbers.
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Figure 1.14 Model Building from root definition and CATWOE
after Checkland in Rosenhead (1989)
1. Appreciate dods
2. Know/decide how
to tonk
3. Obtain gors
4. Tonk gors
7. Take control
action
6. Monitor 1-6
5. Define criteria for

efficiency and efficacy
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1.10 SYSTEMS MODELLING METHODOLOGIES
With all this soft systems work completed, four major methodologies are available to us for
articulating models of complex systems in operations management and management science.
These are:
order of magnitude approximation,

mathematical modelling,
discrete simulation, and
system dynamics.
The last two are our major subjects in terms of coverage here, but the first two are
exceptionally important too.
1.10.1 ORDER OF MAGNITUDE APPROXIMATION
The art of performing order of magnitude calculations is one that it is vital to develop; its
importance cannot be overstated. And yet, perhaps because it is hard to teach, it is something
that is paid far too little attention in textbooks and Western education more generally.
All too frequently our first reaction when confronted as scientists or engineers with some
problem is to acquire large amounts of data and operate upon them with calculators or
spreadsheets. There are several dangers: the data may be error-ridden, we can make mistakes
manipulating them, and our calculations can be flawed or just go wrong. Its very easy to get
a decimal point in the wrong place or to confuse the units of some quantity and not realise!
By contrast the idea behind order of magnitude approximation is minimise the chances of
making a horrible mistake by going instead for speed and simplicity. The steps are thus:
Apply a deliberately simple calculation to whatever rough data springs to mind, and then
Check that the answer feels right.
In some senses order of magnitude approximations are the ultimate in simplification as
covered later in chapter 5. The processes of verification and validation are two further forms
that are hammered deliberately hard in chapters 2, 3 and 4. Look out for them and how they
differ. And use order of magnitude approximations as a first and last resort wherever possible
first to get a feel for the answer and last as a reality check on more detailed
calculations.
1.10.2 MATHEMATICAL MODELLING
This comes in many forms an excellent range having been collected by Andrews and
McLone (1976) - but, as a first example, suppose that we are interested in predicting the
growth in market share that might be attained over the next few months by WATCHIT
Digital Televisions. Suppose too that we have monthly figures to date as shown in Table 1.1,
and that we think that growth of their particular sort of televisions occurs almost exclusively
by inter-personal contacts as indicated in the influence diagram of Figure 1-11.
1-19
Table 1.1 Market Share WATCHIT Digital Televisions
Month
0
1
2
3
4
5
6
Market Share(%)
0.1
0.3
1.2
3.9
11.5
25.5
39.2
Figure 1.15 Growth of Market Share by Inter-Personal Contacts
Contact Factor
Maximum
Market Share
+
+
_
_
Potential
Growth
Market
Growth Rate
Actual
Market Share
+
This leads directly to what is actually a standard mathematical model within innovation
diffusion (Mahajan and Peterson, 1985) i.e. an internal-influence model of the form
dN (t )
bN (t )[ N N (t )]
dt
where N(t) = actual market share at time t, N = maximum market share and b is the contact
factor. By integration we then have
N (t )
1
N N0
exp[ b N (t t 0 )]
N0
where N(t= t 0 )= N 0 .
1-20
Table 1.2 Spreadsheet Implementation of the WATCHIT Model
1
2
3
4
5
6
7
8
9
10
A
WATCHIT
by AMT
Estimate
100
20
0
0
Nbar
Nzero
b
tzero
Month
0
Observed
0.1
11
0.3
12
13
14
15
16
17
18
19
20
21
22
23
2
3
4
5
6
7
8
9
10
11
12
1.2
3.9
11.5
25.5
39.2
Predicted
=C$4/(1+EXP(-C$6*C$4*
($A10-C$7))* (C$4-C$5)/C$5)
=C$4/(1+EXP(-C$6*C$4*
($A11-C$7))*(C$4-C$5)/C$5)
etc
etc
etc
etc
etc
etc
etc
etc
etc
etc
etc
Error^2
=IF(B10="","",(B10-C10)^2)
=IF(B11="","",(B11-C11)^2)
etc
etc
etc
etc
etc
etc
etc
etc
etc
etc
etc
=SUM(D10:D22)
One ready way of establishing credible values of N , N 0 and b and more broadly whether
such an internal-influence model is a good one is to set up a spreadsheet similar to that in
Table 1.2. Initial values (guesses) for the parameters N , N 0 and b say 100, 20 and 0
respectively are entered into cells C4:C6 which are then used to estimate initial values in
the rest of column C. The squares of the errors are then calculated in column D and the
Solver Add-in of Microsoft Excel used to minimise the total of these errors (in cell D23) by
changing cells C4:C6.
With just one run of the solver on its default settings this process yields estimates for N , N 0
and b of 50.20425%, 0.101537 and 0.024815 respectively; a second run (and any further
ones) gives (49.9012, 0.09895, 0.025114) with a slightly lower error.
This is all highly gratifying given that the observed data in Table 1-4 were not observed at all.
In fact they were fabricated using values (not shown) of 50%, 0.1 and 0.025 in cells B4:B6
and formulae in cells B10 downwards of the form =ROUND(B$4/(1+EXP(B$6*B$4*($A10-B$7))*(B$4-B$5)/B$5),1). The behaviour is displayed in Figure 1.16.
1-21
Figure 1.16 Market Share WATCHIT Digital Televisions
60
Market Share %
50
40
Observed
30
Predicted
20
10
0
0
9 10 11 12 13
Months
The internal-influence model therefore certainly seems good, and of course it is

explanatory rather than merely predictive (Rivett, 1972). In what sense, exactly? Well, the
fit of the data would still have been reasonably good if we had instead proposed say a
quadratic model N(t ) 0.97t 2 . However this would not have reflected the very specific
underlying process that is suggested by Figure 1.15; all that we would have done would be to
have spotted that the pattern of the observed data fits a particular mathematical form. Much
of time-series forecasting works (very successfully) in exactly this same way but it can easily
go wrong particularly at the extremes. Extrapolating the quadratic model would suggest
100% around month 10 or so and in excess of 100% thereafter: clear nonsense. Appendix
A1.5 describes a similar approach for the modelling of crowd dynamics.
1.10.3 DISCRETE SIMULATION
Discrete simulation (e.g. Law and Kelton, 1991; Pidd, 1998, 2003) is concerned with
modelling the movements of parts and people individually at a very detailed level, and is
therefore suited to the analysis of operations. It was revolutionised by the introduction of
Visual Interactive Simulation or VIS in the late 1970s (Hurrion, 1978) and the move to menudriven model building in the 1980s (Bell, 1989), but in fairly general terms most
simulationists might agree with a definition something like the use of a model to predict the
behaviour of a stochastic system, and perhaps involving experimentation and statistical
analysis of the results. With VIS in mind, some qualifier might be appropriate to the effect
of including a dynamic visual representation on the computer screen.
Indeed the major challenge for the developers of discrete simulation software is to balance
flexibility against ease of use: historically the balance was in favour of the former, but the
modern emphasis is increasingly on the latter. Surveys appear regularly in the literature (e.g.
Swain, 1999) and the choice is exceptionally wide e.g. Arena, Extend, Promodel, Simul8 and
Witness. The unfortunate reality though is that much of the functionality of software reflects
what suppliers believe will assist sales rather than necessarily what users need, but the
following criteria will usually be important to the manufacturing engineer. Discrete
simulation is now used widely in industry, commerce and the public sector to model the
1-22
behaviour of systems such as production lines, hospital departments and transport systems. It
is covered in chapters 2, 3, 4 and 5.
1.10.4 SYSTEM DYNAMICS
The Industrial Dynamics approach pioneered by Forester and now used widely in business
modelling under the name of System Dynamics rests on isolating a small set of quantifiable
features and defining the relationships between them mathematically. Systems dynamics
models are concerned broadly with smooth, continuous change and based on aggregated
levels and rates of changes of variables. They are thus particularly suited to strategic planning
and policy analysis.
In the 1960s system dynamics promised the ability to model everything but, in the 1980s and
1990s, it fell into some disrepute. Even now, there is no fully satisfactory methodology of
model design, simplification or validation, and complex models are typically built at
inappropriate levels of detail, with misplaced boundaries; key exogenous variables are easily
neglected, so results lack clarity, authority and, probably, correctness. Another difficulty is
that qualitative factors are usually ignored. Perhaps because of the current availability of
vastly improved software such as IThink and Vensim, though, system dynamics is now
enjoying something of a revival. The subject is covered in chapter 6.
1.11 LEARNING TO MODEL AND LEARNING FROM MODELLING
In any formal model building, it is necessarily impossible to include all the elements of a
given situation: there are too many and the interactions between them are too complex. The
trick is thus to recognise the elements and their interactions not completely but adequately.
This is often far from straightforward to achieve but systems thinking (e.g. Richardson 1984;
Saaty and Alexander, 1981; Weinberg and Weinberg, 1988; Jackson, 1991) is actually awash
with useful tools beyond spreadsheets and simulation packages. But of course the modelling
itself is not our goal - however gratifying!
Morecroft (1992) noted that learning takes place when people discover for themselves
contradictions between observed behaviour and their perceptions of how the world should
operate. So, managers must experiment with models, try their own what-ifs, and use
simulations to trigger wide-ranging discussion. Managers are better disposed to the use of
models once they realise that these are representations of their own ideas and knowledge
(model ownership). This participation adds credibility to the results and, subsequently,
managers will be more likely to implement and follow through with their plans. Finally, once
they are familiar with the systems approach, managers will be able to construct and refine
models independently of experts or consultants, so this approach empowers them to plan for
themselves. As a whole, the learning process is of course far from sequential; rather it is
highly iterative as illustrated very neatly indeed by Wolstenholme (1999).
1-23
It is extremely difficult, without constructing a rich picture first, to identify all the influences
(especially those which are not directly influencing the pertinent corporate performance
criteria) simply because it is not easy to take a holistic viewpoint throughout and visualise the
big picture. Any analysis that is based on the rich picture stage alone, without the
refinement of the influence map, would be overly complicated by the large number of
influences and its lack of structure. Instead, it is essential to start the investigation with a rich
picture and then refine this into the influence map. Of course, more than one influence map
may be constructed from the same rich picture, showing different aspects of the problem with
alternative performance criteria at the focal point. Clearly, applying both rich pictures and
influence maps allows managers to conceptualise their organisational systems and displays
the problematic situation. This can help identify a range of solutions to the problem.
Furthermore, the contribution from multiple observers to the rich picture helps to ensure that
a number of different viewpoints are incorporated in the analysis. Therefore, this is an ideal
technique to increase understanding, deal with complexity and add richness to the analysis.
Rich pictures, cognitive mapping and influence diagrams are just three among many
approaches known collectively as Problem Structuring Methods (Rosenhead, 1989;
Daellenbach, 1994; Lehaney et al, 1997). We have applied them to a number of different
companies in the manufacturing and service industries in addition to CENTRO, including the
formulation of the quantitative model in some cases (Clarke et al 1996a; Clarke and Tobias,
1997). Each time, the result was an enthusiastic response by the participants, a clearer
understanding of the major influencing factors and, vitally, models that were robust.
There is of course much more to modelling in general than we have covered so far. To learn
from modelling you must first learn to model. Several detailed questions might already have
occurred to you. For example:
Where should system boundaries be drawn?

What level of detail should be employed?
How can random processes be included?
Can a model ever be a fair representation of reality?
When is simulation the right tool to use?
Which package is best?
The remaining chapters will help you to find answers to these and many other related
questions as summarised in Figure 1.17. Chapters 2 and 3 develop the basics of discrete
simulation and show how it is possible to check results by replicating them on paper. The
former demonstrates the value of building models incrementally and testing at each stage; the
latter introduces stochasticity i.e. how randomness can be included and interpreted. Chapter 4
is perhaps the most involved and demonstrates, through the use of the infamous BOTCHIT
case study, the entirety of the simulation process for a reasonably sized model. Chapter 5
shows how discrete models can be simplified by applying bottleneck analysis recursively,
and how realism is not necessarily ideal. Chapter 6 introduces system dynamics, Chapter 7
covers the practicalities of implementing change including the STARTIT case study and
Chapter 8 deals with Operations Management more widely. By way of conclusion, Chapter 9
illustrates the duality of discrete and continuous models and muses upon the future of systems
modelling generally.
1-24
Figure 1.17 Systems Modelling in Operations Management - Structure of Chapters
Chapter 1: Systems Modelling Why and How?
Motivation for modelling; scope and level of detail; rich pictures, cognitive maps,
muddles and influence diagrams; soft systems methodology; mathematical
modelling, discrete simulation and system dynamics. WATCHIT case study.
Chapter 2: Fundamentals of Discrete Simulation.

Entities, activities, events and simulation executives; incremental development of
JOBIT model into Three machines; verifying simple models on paper; application
of coding tricks; model robustness.
Chapter 3: The Dynamics of Stochastic Systems.

Bar model (DRINKIT); stochasticity, warm-up and steady state; event and activity
sampling; use of random numbers.
Chapter 4: Verification, Validation and Experimentation.

Advanced model checking and use; BOTCHIT case study; run length, paired
replications, confidence intervals.
Chapter 5: Simplification.
Scope and level of detail; Brooks simplification methodology; COOKIT case and
JAMIT case studies; understanding dynamic behaviour.
Chapter 6: System Dynamics.

Equation formulation and simulation executive; delays; smoothing; response and
performance measures. FORRIT and WORLD models.
Chapter 7: Resdesigning Systems and Managing Change.

Types of system failure; approaching, planning and implementing change
through project teams. SHUNTIT and STARTIT case studies.
Chapter 8: Operations Management.

The Laws of Management; Organisational Behaviour; Forecasting; Bills of
Materials and Master Production Scheduling, MRP and Production Control.
Chapter 9: The Pillars of Simulation.

Duality of discrete and continuous modelling; implications of using random
numbers etc; myth of the steady state; richness vs level of detail. DISCONT.
1-25
FURTHER READING
Ackoff, R.L. and Addison, H.J. (2007) Management f-Laws - How Organisations Really
Work, Triarchy Press.
Andrews J.G. and McLone R.R. (1976) Mathematical Modelling, Butterworths.
Casti, J.L. (1994) Complexification: Explaining a Paradoxical World through the Science of
Surprise, Abacus.
Daellenbach, H.G. (1994) Systems and Decision Making - A Management Science
Approach, John Wiley & Sons.
Daellenbach, H.G. (2005) Management Science: Decision Making through Systems
Thinking, Palgrave Macmillan.
Don't Panic - The Truth About Population, [television programme, online], 23:20 7/11/2013,
BBC 2 Scotland, 66mins. http://bobnational.net/record/182487, (Accessed 24/10/2014)
Eden, C., Jones, S. and Sims, D. (1983) "Messing about in problems", Pergamon Press,
Oxford.
Ferguson, N. (2008) The Ascent of Money; a Financial History of the World, Penguin. See
also The Ascent of Money, [television programme, online], 20:00 24/11/2008, Channel 4,
65mins. http://bobnational.net/record/4497, (Accessed 24/10/2014).
Flood, R.L. and Carson E.R. (1993), "Dealing with complexity - an introduction to the theory
and application of systems science", 2nd edition, Plenum, New York, ISBN 030644299X.
Horizon: How Many People Can..., [television programme, online], 21:00 9/12/2009, BBC
TWO, 64mins. http://bobnational.net/record/19852, (Accessed 24/10/2014).
Masters of Money, [television programme, online], 03:15 9/10/2012, BBC ONE, 55mins.
http://bobnational.net/record/118663, (Accessed 24/10/2014).
Mind the Gap: London v the Rest, [television programme, online], 21:00 10/3/2014, BBC
TWO, 60mins. http://bobnational.net/record/205845, (Accessed 24/10/2014).
Pidd, M. (1998) Computer Simulation in Management Science, Wiley, 4th edition.
Pidd, M. (2003) Tools for Thinking, Wiley, 2nd edition.
Pinder C.C. and Bourgeois V.W. (1982) "Controlling tropes in administrative science",
Administrative Science Quarterly, 27 (4), 641-652.
Rivett, P. (1972) Principles of Model Building: the construction of models for decision
analysis, Wiley.
Rosenhead, J. (1989) Rational Analysis for a Problematic World, Wiley.
Waldrop, M. Mitchell (1994) Complexity - the emerging science at the edge of order and
chaos, Harmondsworth Penguin.
1-26
Walker, D.S. and Tobias, A.M. (2007) A Pragmatist's Perspective on Models in
Manufacturing Management: Muddles dressed as Models. Strategic Change, Vol.16(6), pp
295-301. DOI:10.1002/jsc.801
Waring, A. (1996) Practical systems thinking: International Thomson Business Press.
Wu B. (1994) Manufacturing Systems Design and Analysis, Chapman & Hall.
ADVANCED READING
Ackoff, R.L. (1993), Idealised Design: creating corporate visioning, Omega International
Journal of Management Science, volume 21, pp 401-410.
Bell, P.C. (1989) Stochastic Visual Interactive Simulation Models, Journal of the
Operational Research Society; 40 (7), pp 615-624.
Burke, W. W. and Litwin, G.H. (1992),. A Causal Model of Organisational Performance and
Change, Journal of Management, volume 18, issue 3, pp 523-545.
Checkland, P.B. (1981) Systems thinking, systems practice, Wiley, Chichester.
Checkland P.B. and Scholes J. (1990) Soft systems methodology in action, Wiley,
Chichester.
Clarke, S., Hopper, T. A., Tobias, A. M. and Tomlin, D.J. (1996), Corporate Modelling at
RAC Motoring Services, O.R. Insight, volume 9 issue 3, pp 6-12.
Clarke, S. and Tobias, A. M. (1995a), Corporate Modelling in the UK - A Survey, O.R.
Insight, volume 8 issue 3, pp 15-20.
Clarke, S. and Tobias, A. M. (1995b), Complexity in Corporate Modelling: A Review,
Business History, volume 37 number 1, pp 17-44.
Clarke, S. and Tobias, A.M. (1996), Exploring Corporate Performance, O.R. Insight
volume 9 issue 4, pp 11-17.
Clarke, S. and Tobias, A. M. (1997), Corporate Modelling in the Metals Industry ensuring
a systems approach to corporate strategy development, O.R. Insight, volume 10 issue 3.
Doepke, M., Lehnert, A. and Sellgren, A.
http://faculty.wcas.northwestern.edu/~mdo738/book.htm .
(2000)
Macroeconomics,
Eden, C. (1988) "Cognitive Mapping", European Journal of Operational Research volume

36.1, pp 1-13.
Ferguson, N. (2001) The Cash Nexus: Money and Power in the Modern World 1700-2000,
The Penguin Press, Allen Lane.
Ferguson, N. (2006) The War of the Worlds: Historys Age of Hatred, Allen Lane.
1-27
Grant D. and Oswick C. (eds.) (1996) Metaphor and Organizations, Sage.
Griffiths H.B. and Oldknow A (1993) Mathematics of Models: continuous and discrete
dynamical systems, Ellis Horwood.
Hurrion, R.D. (1978) An investigation into Visual Interactive Simulation methods using the
job shop scheduling problem. Journal of the Operational Research Society, 29, pp 10851093.
Hitchins DK (1992) Putting Systems to Work, John Wiley and Sons, Chichester.
Jackson, M.C. (2003) Systems Thinking: Creative Holism for Managers, Wiley.
Jackson, M.C. (1991) Systems Methodology for the Management Sciences, Plenum Press,
New York.
Kraus, J.D. (1991). Electromagnetics, 4th edition, McGraw-Hill. pp 5.
Law AM and Kelton WD. (1991). Simulation Modelling and Analysis, 2nd edition,
McGraw-Hill, New York.
Lehaney B., Martin S. and Clarke S.A. (1997) A Review of Problem Structuring Methods,
Systemist, 19(1), pp 11-28.
Mahajan V. and Peterson R.A (1985) Models for Innovation Diffusion, Sage.
Meerschaert MM (1993) Mathematical Modeling, Academic Press.
Morecroft, J. D. W. (1992). Executive Knowledge, Models and Learning. Eur. J. Operat.
Res. 59, 9-27.
Mullen PM (2000) Public Involvement in health-care priority setting: are the methods
appropriate and valid? In Coulter A & Ham C (eds), The Global Challenge of Health care
Rationing, Open University Press, Buckingham.
Palmer, I. and Dunford, R. (1996), Conflicting Uses of Metaphors: Reconceptualising their
Use in the field of Organisational Change, Academy of Management Review, volume 21,
number 3, pp 691 717.
Richardson J. (ed) (1984) Models of Reality: Shaping Thought and Action, Lomond
Publications, Maryland.
Rosenhead, J. (1992) Into the Swamp: The Analysis of Social Issues, Journal of the
Operational Research Society, volume 43 (4), pp 293-305.
Saaty T. L. and Alexander J. M. (1981) Thinking with Models, Pergamon.
Starfield AM, Smith KA and Bleloch AL (c1990) How to model it : problem solving for the
computer age, McGraw-Hill, New York.
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26(1) pp 38-51.
1-28
Weinberg G. M. and Weinberg D. (1988) General Principles of Systems Design, Dorset
House Publishing , New York.
Wolstenholme EF (1999) Qualitative vs Quantitative modelling: the evolving balance,
Journal of the Operational Research Society volume 50, pp 422-428.
QUESTIONS
1-1
Give three examples each of seemingly irreconcilable Weltanschauungen within the
spheres of (a) particle physics, (b) the criminal justice system or (c) architecture. Discuss
briefly.
1-2
Draw up a cognitive map of the problems faced by the non-ferrous metal producers
described in Appendix A1.2.
1-3
Find one example in the management literature of each of the types of model
caricatured in Figures 1-6, 1-7 and 1-8, plus one other that appears genuinely different.
Tabulate and comment upon their various sources, uses, strengths and shortcomings.
1-4
(a) One month beforehand what would have been your estimate of WATCHITs
eventual maximum market share? Hint: the 39.2% figure would not have been available. (b)
What about if it then reached 46.3% a month later? (c) Try a few other experiments and
hence comment upon the general degree of adequacy and sensitivity of the internal-influence
model.
1-5
Investigate whether the market share data in section 1.8.2 might be modelled better
using the well-known Gompertz function
dN (t )
bN (t )[ln N ln N (t )]
dt
N
for which the solution is N( t ) N exp{(ln
) exp[ b N( t t 0 )]} with a point of inflexion at
N0
0.37 N .
1-6
Develop an expanded version of Figure A1.2 that explicitly recognises track wear and
repair as two further processes in the context of maintenance on the railways. Then add in the
obvious but peripheral items (such as weather, traffic intensity, wheel hardness and wheel
maintenance) and hence produce an influence diagram based on a reasonably broad but
strictly technical Weltanschauung.
1-7
Referring to Figure A1.3 what might you expect to pay for (a) taking a four-seater
taxi from Edgbaston to Birmingham International Airport (b) flying economy from
Birmingham to Melbourne Australia return. How do these figures compare with real prices,
and what do you conclude about comparing apples and oranges?
1-8
Develop root definitions and hence corresponding SSM models for three completely
different Weltanschauungen of the UK railways. Compare each with reality and discuss the
various differences that your analyses expose.
1-29
1-9
Under what circumstances is it appropriate to use (a) each of the modelling
methodologies described above and (b) any other modelling methodologies of which you are
aware. Answer in tabular form, and give examples wherever possible.
1-10
What is the difference between an algorithm and a heuristic?
1-11
Discuss the folly of describing (a) participation in a protracted TV gameshow as a

journey (b) peace plans as roadmaps.
1-12
Analyse one of:

(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)
whether income can be generated, or indeed wealth created;

the reality of choice in the absence of surplus capacity;
regulation of free markets
focusing on processes rather than outcomes, and the extent to which this is at
odds with holism;
what is wrong with the world;
striving for consistency of laws, procedures and protocols etc in the context of
very high variety, customization and individualism;
infinite demand versus finite supply in the provision of healthcare;
whether banks (and indeed corporations and countries) can be too big to fail
and hence capitalism is kaput;
why (from a systems perspective) individuals, organizations and nations alike
seem obsessed with growth;
the environmental costs of growth and free trade;
whether systems thinking is a prejudice or a position; or
minimalism as the acceptance of bare adequacy;
structuring your answer not as a conventional essay that merely reflects accepted wisdom but
rather as three different problem structuring methods or models supported by no more than
200 words of supporting text that together:
describe the nature, development and manifestation of the problem,

analyse it in formal systems terms from one or more precisely-defined perspectives,
and
lead to a coherent, demonstrated or demonstrable insight or hypothesis about it that is
beyond the obvious, self-evident or received truth.
1-13 Ferguson (2006) likens the outbreak of the First World War to a Great Train Crash
describing how like train drivers knowingly steaming full tilt towards one another, [the great
powers] had caused the great train crash of 1914 (pp 184). Tabulate a comparison of the
various features of these two, and hence comment upon the overall utility of the metaphor.
1-14 Imagine how money might have developed on FLOGIT, a small remote island in the
Pacific whereon one of the only three inhabitants: a miner who digs for coal and thus keeps
warm but, so as to eat, needs to trade with a fisherman who hunts the in-shore waters of the
ocean but needs heat, and each pays a percentage of his production to a professional gladiator
for protection from the fierce animals. Thus draw an influence diagram that models (from a
systems perspective) the nature of such constructs as: assets and reserves; promissory notes,
1-30
debt and liabilities; credit, lending and interest; gold standard; economic growth, money
supply, inflation, depression, recession, boom and bust. [Hint: see Ferguson (2001) for ideas
on how war necessitates taxes, and hence leads to debt, interest and inflation etc].
1-15 See Crusoes approach to macroeconomics in Doepke (2000) and hence draw up a
network of linked Input-Output diagram representing the interactions between the elements
of FLOGIT (described in question 1-14) when viewed as a system.1
1-16 Referring solely to the specified sources, reflecting as far as possible their specific
vocabulary and terminology, and in the spirit of Appendix A1.1, draft, shape and refine a
systems diagram encapsulating the views firstly in column (a), next in column (b) and then
combined with each other6 (c) so as to produce a single unified view of the series.
1-16.1
(a)
Masters of Money 1/3 (on Keynesian
interventionism)
(b)
Masters of Money 2/3 (Hayeks view of
free market capitalism)
1-16.2
Made in Britain 1/3
Made in Britain 2/3
1-16.3
How Many People Can Live on Planet

Earth?
Don't Panic: the Truth about Population

Growth
1-16.4
Mind the Gap: London v the Rest 1/2
Mind the Gap: London v the Rest 2/2
1-16.5
Ascent of Money 1/6
Ascent of Money 2/6
And indeed any further episodes where these exist.
1-31
APPENDIX A1.1 DRAWING SYSTEMS DIAGRAMS
The importance of shaping diagrams as described in section 1.5 is not limited to cognitive
maps: the reality is that every systems diagram of any worthwhile insight is likely to be the
last of at least two major metamorphoses subsequent to their initial conception. By way of
example, consider Figures A1.1 to A1.3 below: they were the predecessors of what
eventually emerged and now appears as Figure 1.1. Although not all retained, much of the
specialist vocabulary7 was inspired originally from a reading of Rosenhead (1992).
Figure A1.1 Systems Thinking (First Attempt)
Completely
Informed
(.. Ignorant)
Single
Perspective
Diagrams and
Quantitative Models,
Analysis, Reason,
Evidence, Questioning
and Challenge
.. Dogma, Prejudice, Hearsay,
Acceptance of Metaphor,
Long-Winded Text,
Rhetoric and Woffle
Joined-Up
Systems
Thinking
Good
Decisions
Better World.
.. Unintended
Consequences
Figure A1.2 Process of Systems Thinking (Second Attempt)

Concise Analysis
and Reason
Coherent Policy
Robust Systems
.. Unintended Consequences
Diverse Interest Groups,

Informed and Multi-Perspective
Apolitical; technocratic; doctrine; public, not sectional interests; interventionist government; priorities;
analytic propensity; analytic tools for handling decision making under uncertainty and especially complexity;
efficiency problems within large, unitary organizations; inter-acting factors; negotiate; technical feasibility;
diverse interest groups; policy analysis; outcome; hegemonic ideology; issues; interrelated; purposes and
perceptions; set the terms of public debate selectively; positions; consensus; coalition formation; hidden
agendas; Machiavellian calculations; intuitive decision-making; strategies which are mutually preferable;
competitive with and complementary to partisan interaction; political discourse; consequences; policy choice
based on evidence and argument rather than on principles and gut reaction; policy advice; downside effects;
alternative policies; filter of critical scrutiny; consultation; strong value assertions; detailed prescriptions;
anecdotal evidence; administrative or political chaos; opposition; discussion; studies; criticism; intention;
unintended effects and side-effects; socially desirable; divisiveness, inequity, philistinism, illiberality and shortsightedness; retreat from reason; informed debate ahead of commitment; popular support; controversies; semimystical belief in market forces; rational choice; omnipotence of reason; enrich and inform collective
judgement; transparent and participative, enabling rather than controlling; illuminate policy options; viable
policy; multiple advocacy.
Evidence
Desired Outcomes
.. Unintended Consequences
Analysis with Robust, Quantitative,

Concise Models
.. Loose textual Metaphors
Consensual, Coherent/Policy
Negotiation, Consultation,
Questioning,
Debate and Reason
1-32
Figure A1.3 Systems Thinking Approach (Third Attempt)
1-33
APPENDIX A1.2 SYSTEMS THINKING ON THE RAILWAYS
A1.2.1 THINKING THAT LITTLE BIT BIGGER
Some seasoned academics would perhaps be horrified at the thought, but the popular
comedian Russ Abbott put systemic thinking into a nutshell with his series of television
advertisements for a leading brand of cigars. In one of these he holed a seemingly impossible
shot at golf with a series of highly unlikely bounces and deflections off a host of obstructions
including trees, bridges and even a moving train!
From the viewpoint of the systems engineer the lesson is about standing back from the
problem and succeeding by seeing the big picture. At least in this sense the railways are no
different and such techniques as brainstorming and lateral thinking can be invaluable.
Producing good solutions to problems on the railways will often involve first trying to
understand other competing transport systems. Ticket costs for example might seem to make
no sense say 2 to ride 4 miles from Edgbaston into Birmingham and back on a bus,
compared with 12 Bristol to Birmingham return on the train or 18.50 Birmingham to
Dublin return by air. But realise that what passengers are actually paying for is not distance
but the time for which they are being looked after, and the beautifully simple linear
relationship of Figure A1.4 becomes apparent. Just be very careful though of interpolation
(because we have based our line upon just three points) and extrapolation (because the
gradient is uncertain).
Figure A1.4 Ticket Prices () in the Transport Sector
20
15
10
5 hours
1-34
A1.2.2 SOFT SYSTEMS ANALYSIS AT CENTRO8
The example rich picture in Figure A1.5 was developed in the early 1990s as part of a soft
systems analysis of West Midlands Passenger Transport Executive, CENTRO. The work was
intended to identify the factors affecting its profitability and formulate strategies to improve
its performance (especially with regard to the upcoming plans for the privatisation of British
Rail) but deliberately without going as far as developing a fully computerised corporate
model (Clarke and Tobias, 1996).
Figure A1.5 Rich Picture of CENTRO and the Rail Industry
Competition
Central
Targets
Government
Centro
Revenue
Contracts
Punctuality
Passengers
Regional Railways
Railtrack
Weather
Local Government
Maintenance
Apart from passengers, there were three main stakeholders: CENTRO (the executive
specifying the passenger services in the West Midlands), Regional Railways (the operating
unit running the services to CENTROs specifications) and Railtrack (the predecessor of
Network Rail, supplying and maintaining the track, signals and other hardware for Regional
Railways). Rolling stock was owned by a number of other companies, but effectively was
controlled by Regional Railways. Funded by Local Government (the Passenger Transport
Authority) and by fee-paying passengers, CENTRO was responsible for setting fares and
taking revenue; their major objective was to maximise the number of people using public
transport by providing a cheap and reliable service. Central Government influence was
exerted through OPRAF, the rail franchising watchdog of the day, which set the minimum
service levels on socially necessary passenger transport services. Because the industry was in
public ownership at the time of the analysis, any profits were being returned to the state.
Complications arose because of the interactions of the other stakeholders. For example,
8
Extracted for educational use by kind permission of the Operational Research Society from: Clarke, S. and
Tobias, A. M., Exploring Corporate Performance - a systems approach to corporate modelling helps
understanding and guides model development, O.R. Insight, volume 9 issue 4, October - December 1996.
1-35
CENTRO were contracting Regional Railways to supply the train service on a rewards and
penalties basis. If the service fell below the required standard (e.g. trains failed to arrive
within three minutes of schedule), payments from CENTRO to Regional Railways were
withheld. However, CENTRO had no contractual agreements with Railtrack, which in turn
was contracted only to Regional Railways, so CENTRO had no direct control over the rail
operating equipment or its maintenance. Furthermore, passengers considered reliability and
punctuality (i.e. the performance of the service) as the major influence affecting their choice
of travel. Unfortunately, with performance being directly affected by levels of maintenance,
CENTRO had little control over passenger satisfaction.
Clearly, CENTROs situation was extremely complex and the rich picture helped to clarify
the situation, enhancing managements understanding of it. Although not part of the original
work, one possible and highly simplified interpretation of the problems that it highlighted at
CENTRO is shown in Figure A1.6. By providing cheap and reliable services, Regional
Railways was avoiding penalties and minimising costs whilst CENTRO maximised public
transport and its revenue. The view of Railtrack was different: because the network was
operating so near to capacity, maximising public transport was producing congestion on the
network and leading to unreliability. This dichotomy lay arguably at the heart of the problem
- and capacity could only be increased by massive investment i.e. higher prices.
Figure A1.6 Cognitive Map of CENTROs problems in the rail industry
Maximise Public
Transport
Congestion
Maximise Revenue
CENTRO
RAILTRACK
Cheap & Reliable ..

Expensive Unreliable
Service
REGIONAL
RAILWAYS
Avoid Penalties
Minimise Costs
1-36
Figure A1.7 is the influence diagram for CENTRO and shows a number of important
influence loops. The public ownership loop shows how National Government was funding
Local Government, which in turn funded CENTRO, the latter paying corporation tax on its
profits. Similarly, the regulation loop shows how National Government controlled OPRAF
which dictated the minimum levels of CENTROs service, thus regulating the scope of the
timetable by setting a base line. Customer satisfaction was a major issue that depended upon
the punctuality and reliability of the service, the scope of the service (i.e. the timetable) and
the level of competition, which allowed customers to draw comparison with the bus service
for instance, and continually tempted them away from rail transport. This market loop had a
major influence on the level of usage of the rail transport system but it was the operations
loop that was probably of most concern to CENTRO. Previous studies had indicated the
importance of punctuality and reliability, and these are directly influenced by the level of
maintenance and the performance of Regional Railways and Railtrack. Although CENTRO
could influence Regional Railways performance through the reward and penalty scheme
(i.e. the contractual loop) it had no influence over Railtrack.
Figure A1.7 Influence Diagram for CENTRO
Payments
Scope of
Timetable
(Operations
)
+
Local
Government
+
Maintenance
Customer
Satisfactio
+
(Public
Ownership)
Profit
-
+
Usage
(Market)
+
National
Government
Regional Rail
Performance
Punctuality
&
Reliability
Level of
Competition
Weather
Conditions
(Contractual
)
Railtrack
Performance
1-37
A1.2.3 HAVING IT BOTH WAYS
Listen to people peddling change politicians, executives, virtually anyone and you might
well be forgiven for getting the impression that there is never any downside to thinking big
as described above. Quite the contrary: there is nothing that operates in perfect isolation, so
however overwhelmingly the gains may appear, there will always be a price to pay
somewhere.
This includes the railways; the particularly high degree of interconnectivity within transport
just means that the effect is often confounded and so harder to discern. Consider the examples
in Table A1.1; realise that you can never have it both ways and dont believe the
Changemaster when you are told otherwise.
Table A1.1 Robbing Peter to pay Paul on the Railways
Action / Decision
Living remotely from work
Low Taxes
High utilisation of network
Savings from contracting out of
railway infrastructure maintenance
Consequence
Rush hour congestion
Under-investment in British Rail
Knock-on delays; low punctuality
Potters Bar
1-38
APPENDIX A1.3 STRATEGY DEVELOPMENT IN THE METALS INDUSTRY9
This case study records selected activities of strategy development within a large UK
company in the non-ferrous metal processing industry along similar lines to two previous
applications (Clarke and Tobias, 1996; Clarke, Hopper, Tobias and Tomlin, 1996) in a series
of three. The company had a 40% market share, although the market was mature and starting
to decline in size as this particular metal is eventually replaced with less costly, more
environmentally friendly materials. To preserve confidentiality, the description has been
generalised, the names of the company, industry and major competitor omitted, and the sales
figures have been disguised.
A1.3.1 THE COMPANY
The company manufactured hundreds of different products, all of which can be generically
grouped into three product groups. Scrap material is bought from merchants, smelted into
billets of different size and alloy content, formed into the different products and finally sold
to customers (usually stockists of building, electrical, engineering and DIY outlets).
Complications arise because the cost of scrap metal, fixed by merchants at a discount below
the London Metal Exchange (LME) prices, fluctuates constantly. Also, the companys
product selling price is traditionally determined by its major competitor. This strange
situation has resulted because the competitor was once the largest company in the market and
has retained its dominance by determining the selling price throughout the industry.
However, the company chooses not to dispute the set selling price because it is unwilling to
enter into a price war. Unfortunately, this renders it virtually powerless, having no control
over the cost of raw materials or the selling price of its products. Furthermore, because it does
not advertise, the only influence it has on its customers is through the range of products, their
quality and production lead times.
A1.3.2 SYSTEMS ANALYSIS
The first step here was to construct a rich picture displaying the many factors influencing the
company and its business environment. Accordingly, Figure A1.8 was constructed during a
brainstorming session with the management, and then reassessed and revised during a followup meeting. There were five areas of concern: scrap material, manufacturing and distribution
costs, sales, market share and profit. Although, in the past, the management had attempted to
address these problem areas distinctly, the rich picture clearly pointed to a system with
complex interactions. The management soon recognised the importance of holism and
accepted that its more usual reductionist approach to problem solving was limited.
Firstly, the cost of raw material is clearly influenced by LME metal prices and by its alloy
content. Furthermore, LME is itself influenced by a number of factors, especially the UK
economy which also influences many other UK industries. Secondly, the companys order
wining criteria (i.e. the superior quality of its products and distribution facilities, its strong
product line which includes many non-standard items, its willingness to fulfil small orders
Extracted for educational use by kind permission of the Operational Research Society from: Clarke, S. and
Tobias, A. M., Corporate Modelling in the Metals Industry - ensuring a systems approach to corporate strategy
development, O.R. Insight, volume 10 issue 3, July - September 1997.
1-39
Figure A1.8 Rich Picture
1-40
and, importantly, its small, consistent lead times) are marginal when compared to its
competitors. Furthermore, manufacturing and distribution costs are mostly influenced by
labour and overhead costs (both manufacturing and distribution overheads), scrap costs and
the efficiency of the manufacturing process. Investment in new technology would improve
manufacturing efficiency, reduce labour costs and increase production capacity. Clearly, this
is important because lead times influence sales, many of which are lost when long delivery
times are quoted to customers.
The construction of the rich picture helped the management understand the importance of
many of the factors influencing the companys business climate. The management was
surprised to see how little control it had over sales. However, a number of problem areas had
now been identified which could be investigated with the help of the corporate model. Also,
this approach encouraged model ownership and developed the managements interest in it.
In further consultation, two influence diagrams were constructed from the rich picture, one
focusing on UK sales orders (Figure A1.9) and another on manufacturing and distribution
costs (not included). Sales figures for both the company and the UK industry were provided,
together with scrap metal costs and estimated sales prices (Table A1.2). Other data were
collected from public sources (e.g. Companies House provided the competitors financial
accounts for the past three years). Figure A1.8 shows how the companys market share
depended on the demand for its products at stockists and that the substitution of other
products influenced sales orders. Exogenous factors (e.g. the strength of the economy) clearly
had a major effect on market share and sales. However, endogenous factors, such as relative
product and distribution channel quality, and production lead times, were controllable
through investment. These were the only factors that the company could adjust to control its
market share and sales.
Figure A1.9 Influence Diagram UK Sales Orders
1-41
The influence diagram highlighted the important effect of the macro-economic environment
on sales. Unfortunately, the companys order winning criteria were not significantly
differentiated from its competitors, there was no price differential between their products
(because of the common pricing policy) and it did not advertise (so it was unable to influence
short-term demand). Therefore, the companys sales levels were governed by the level of
industry sales and, in turn, industry sales were influenced by general economic conditions,
e.g. housing starts, gross domestic fixed capital formation and imports.
Table A1.2 Estimated 1995 average sales prices.
Product Group
Sales price (/tonne)
1
1700
2
2500
3
1900
A1.3.3 STRATEGY FORMULATION

The analysis of the business and industry environment was facilitated by the rich picture and
influence diagrams. Taking a systems approach had made it clear to the management that the
companys reliance on scrap metal merchants to supply raw materials at consistent prices, its
long production lead times and its poor production yield, were potentially serious
weaknesses. Therefore, the two areas chosen for strategy evaluation using a corporate model
were the acquisition of a scrap metal merchant and the purchase of new technology and
machinery (denoted A and B respectively).
The corporate model was used first to produce and compare forecasted financial accounts,
sensitivity analysis, General Electric Portfolio matrices, sustainable growth and solvency for
each strategy. The management thought the company could save up to 5% of raw material
costs if a scrap merchant, costing 2m, was purchased using a long-term bank loan at 15%
interest per annum (strategy A scenario). Alternatively, new machinery, purchased with a
6m long-term loan (drawn down over a three year period) at 15% interest, could increase
production yield by as much as 8% (strategy B scenario).
The forecasted financial accounts of the strategy A scenario showed that retained earnings
would have increased from 164,000 (forecasted for the current strategy) to 1,197,000 in
1995. Even if the saving on raw material cost was only 3% (instead of 5%) or the cost of
purchasing the merchant increased from 2m to 5m, retained earnings were still far in
excess of those for the current strategy. Similarly, the forecasted financial accounts for
strategy B showed that the retained earnings would have increased to 2,702,000 in 1995.
Even if the increase in yield was only 3% or the cost of purchasing the equipment increased
from 6m to 9m, retained earnings were still far in excess of those for the companys
current strategy. Actually, strategy B was almost always superior to strategy A.
A1.3.4 GENERAL ELECTRIC MATRIX EVALUATION
The penultimate step of the analysis was to construct the General Electric (industry
attractiveness-business strength) matrix [Hax and Majluf, 1984]. First, the attractiveness of
the industry was assessed subjectively by the management. Weights and rates were assigned
to criteria such as industry size, market growth, competitive structure, industry profitability,
social, legal and financial factors, etc., for both 1994 and 1999. The weights reflected the
importance of the criteria to the company, while the rates indicated the attractiveness of the
industry.
1-42
Next, business strength was analysed for the current strategy and contrasted to that for
strategies A and B. Similarly, criteria such as market share, profit margin, production
capacity and efficiency, etc., were weighted and rated for 1994 and 1999. The weighting
reflected the importance of the criteria to the companys overall profitability, market share
and competitive position, while the rating represented relative business strength relative to its
major competitor. Market share and profit margin criteria were directly calculated by the
corporate model, although the other criteria were assessed experientially by the management.
Figure A1.10 shows the GE matrix with the 1994 position and 1999 position resulting from
the current strategy and from strategies A and B. All three strategies reflected the decline in
industry attractiveness between 1994 and 1999, inevitable given its maturity. However, the
companys current strategy would result by 1999 in a need to harvest/divest. On the other
hand, strategies A and B would improve business strength from medium to high.
Figure A1.10 Industry Attractiveness/Business Strength Matrix
High
Medium
Low
1999
Strategy
A&B
High
Harvest / Divest
Selective Growth
Business Strength
Medium
1994
1999
Current
Strategy
Investment and Growth

Selectivity
Low
A1.3.5 CONCLUSIONS
This was a classic case of a company struggling in a mature market. The case study showed
that the company faced a dilemma. Although the implementation of strategy B would
increase profitability and possibly increase market share by reducing lead times, the
management must address the problem of the eventual decline of the industry. Possibilities
such as rejecting the common pricing mechanism or diversifying into other businesses, could
also be investigated. However, the management had to act quickly if the company was to
survive.
1-43
APPENDIX A1.4 CORPORATE MODELLING AT RAC MOTORING SERVICES10
This case study describes the development of a model of RAC roadside operations using the
some of the approaches covered in this chapter. A soft systems influence mapping technique
was used to describe the underlying system and its inter-relation with the business
environment. Next, a statistical analysis of the influential factors was conducted to quantify
changes in productivity, rescue patrol attendance rate, overall level of service and the number
of contractor jobs. Finally, a spreadsheet corporate model (using the causal equations
developed by the statistical analysis) was used to predict company performance, helping to
highlight a number of peculiarities in RAC operation and its zone configuration.
A1.4.1 INTRODUCTION
The Royal Automobile Club (RAC) is a motoring organisation with a history of over 100
years and, with some 6 million members, it is the second largest in the UK. Its primary
objective is to provide a breakdown service for members and it has a fleet of over 1500
vehicles (patrols) of varying types and capabilities. However, if resources are either at full
capacity or inappropriate for a breakdown, RAC can call on a number of privately owned
vehicles operated by contractors. Although this is an extremely complex nation-wide
network, RAC prides itself on reaching members within an hour of receiving requests for
assistance.
To manage the system more effectively, RAC had divides the UK into six regions each with
its own supercentre. The regions are London and South East England (supercentre located in
London), South West England and South Wales (Bristol), Central England (Walsall), North
England and North Wales (Stockport), Scotland (Glasgow) and Northern Ireland (Belfast).
These are split further into zones (represented by letters) which in turn are divided into cells;
typically a zone is centred around a major town but large conurbations may be split into
several different zones.
Behind the roadside operation is a vast system of computer networks and a variety of support
personnel. Unfortunately, operations are complicated by unpredictability (e.g. weather, traffic
conditions and the randomness of breakdowns). A Computer Aided Rescue Service (CARS)
is used throughout the organisation to manage the roadside operation, producing various
measures of quality and efficiency such as overall level of service (OLOS), rescue patrol
attendance rate (PAR) and vehicle fix rate (VFR). A complete glossary of terms and
definitions is given in Table A1.3.
This project was concerned with developing a model which would enable RAC to understand
the inter-relationships between the various performance indicators and predict the effect of
changes.
10
Extracted for educational use by kind permission of the Operational Research Society from: Clarke S, Hopper
TA, Tobias AM and Tomlin DJ (1996), Corporate Modelling at RAC Motoring Services, OR Insight 9(3), pp 612.
1-44
Table A1.3 Glossary of Technical Terms
AGNT (Agent (Contractor) Go-Not-Tow
The percentage of contractor rescue jobs that are completed with the
vehicle being remobolised.
The RACs computer service, used to gather and store breakdown details
and report on the various quality and efficiency measures.
A complementary resource to the RAC patrols which are appointed
garages approved to act on behalf of the RAC.
A member of staff who allocates an appropriate patrol resource to each
service job.
A service job that results in the member receiving a hire car, hotel
accommodation or some form of onward travel.
The percentage of service breakdowns with a resource at the breakdown
scene within 60 minutes.
CARS (Computer Aided Rescue Service)

Contractor
Despatcher
HAT Job (Hire Accommodation Travel Job)
OLOS (Overall Level of Service)
Opportunity
Opportunity =
Number of Attended Service Breakdowns

Number of Patrols
PGNT (Patrol Go-Not-Tow)
The percentage of patrol rescue jobs that are completed with the vehicle
being remobolised.
Productivity
Productivity = Opportunity
Recovery Job
A service job which is completed with the vehicle being towed more than
20 miles.
The percentage of recovery jobs with a resource at the breakdown scene
within 120 minutes.
The percentage of the recovery jobs completed by patrols.
A service job which is either completed without a tow or is completed
with a tow that is under 20 miles.
The percentage of rescue jobs completed by patrols.
ROLOS (Recovery Overall Level of Service)

Recovery PAR (Recovery Patrol Attendance Rate)
Rescue Job
Rescue PAR (Rescue Patrol Attendance Rate)
Rescue PAR=
Service Breakdown
Rescue PAR
100
Productivity
Opportunity
A breakdown where some form of rescue and/or recovery service is

provided.
The percentage of attended service breakdowns which are fixed.
VFR (Vehicle Fix Rate)
A1.4.2 SYSTEMS ANALYSIS

It was first important to understand how RAC works and the systems that are in place.
Therefore, the initial phase of the investigation involved the creation of a simplified causal
diagram called an influence map. In the usual way, elements were connected by arrows to
show dependence and differentiate causes from effects.
A number of key personnel were interviewed and encouraged to draw individual influence
maps of the factors affecting performance. Therefore, each person conveyed his/her own
thoughts and opinions and expressed the major relationships they perceived to exist within
the roadside operation. Naturally, the interviews were tailored to suit the knowledge and
experience of the individual. For instance, the finance manager was asked to draw the
influence map with reference to costs, whilst the operations manager concentrated on the
operational aspects of the company. The influence map covering the entire organisation was
then drawn up by combining the individual maps (Figure A1.11). This inherently holistic
approach provided management with a clear picture of the complex factors affecting RAC
performance, and encouraged management participation in the planning process which
established model ownership. It also helped to generate a consensus amongst the
participants, resulting in a deeper commitment to the model and, hopefully, easing the
implementation of any plans which are developed.
At the core of the business, members create breakdowns and, in turn, these provide patrols
with the opportunity to provide service. Opportunity (RAC terminology for the maximum
number of jobs a patrol has the potential to attend) determines patrol utilisation and thus the
1-45
various performance figures. Since patrols tend to arrive at breakdowns more quickly than
contractors, the level of rescue PAR affects the OLOS performance figure, which is the main
factor affecting customer satisfaction. (Members are most concerned with being reached
promptly, with minimum delay). Hopefully, satisfied customers have high regard for the
service and renew their memberships. This maintains the number of members, completing the
loop on the influence map. The remaining relationships are also believed to have significant
effects on the operation and provide additional reinforcement to the core loop.
A1.4.3 DATA COLLECTION
The CARS system stores data in a variety of forms, from a national level down to the
individual zones and cells of a particular region, and from a yearly to a daily basis. To decide
on the range and detail required for this model a number of factors were considered. For the
model to be accurate and flexible it was felt best to concentrate initial efforts on a single
region within the CARS system. To develop a first model, the Central England region was
chosen, stretching from the Welsh border to the Norfolk coast, and containing a wide range
of contrasting geography from major urban conurbations (e.g. Birmingham and Nottingham)
to rural countryside areas (e.g. Norfolk and Lincolnshire). This provided a wide spectrum of
breakdown scenarios to investigate.
Accordingly, data were collected for each of the 17 corresponding zones (labelled from A to
Q) in the Central region. RAC underwent a substantial managerial change in early 1992, so
any data from before or over this period would be uninformative and unrepresentative. Also,
the geographical specifications of the zones in the Central region have also changed
frequently in recent years, although the specifications remained unaltered between November
1993 and March 1995. Therefore, monthly data were collected from this relatively static
period.
The primary source for the roadside operation quality and efficiency measures were archive
and current on-line CARS reports. This included numbers of attended service breakdowns,
rescue PAR, OLOS, VFR, etc. The patrol information facilitated a detailed study of the
number of patrols and the types of patrol in each zone. Patrol types were split into four
categories - motor cycles, small vans, panel vans/four-wheel drive vehicles, and lift/tow
trucks.
Archive files provided membership details. The number of members for each postcode in the
region was obtained and then sorted to obtain figures for each zone; other data were collected
from reports produced by various departments. The finance department provided cost and
patrol information for each period in the time range. Similarly, the customer relations
department provided figures for the number of complaints and commendations received from
members in each period. Also, the marketing department provided customer satisfaction
index (CSI) reports which gave an overall regional CSI and one for each of the eight area
service managers (ASMs) working in the Central region.
1-46
Figure A1.11 RAC Roadside Operations Influence Map
1-47
Data were also acquired from external sources. Weather information was obtained from five
weather stations within the Central region from the monthly publication The Weather Log.
Information for each month included the mean, maximum and minimum temperatures,
amount of rainfall and number of days with rain, fog, frost and snow. An index was then
formed to describe weather severity. Similarly, a holiday index was developed to indicate
periods during the year when the roads were busier due to holidays (e.g. Christmas and
Easter), bank holidays and special events.
Finally, the types of geography throughout the region were assumed to be reflected by the
varying population density levels in each of the zones (i.e. the relatively high population
density of urban city areas compared to rural countryside areas). Population and area figures
were obtained for each county (and districts within the county) from the 1991 UK Census.
These gave population density figures for each zone.
A1.4.4 STATISTICAL ANALYSIS
The influence map was used to identify the important factors and relationships present in the
roadside operation. This included matching the dependent variables (factors for which the
model would be used to estimate) with their corresponding candidate independent variables
(factors which had influence over the dependent variable).
Bivariate correlation coefficients were calculated and scatter plots drawn to determine a short
list of candidate independent variables for a multiple regression analysis. This helped
establish whether any linear or non-linear relationships existed. Transformations of the
independent variable were attempted if relationships appeared to be non-linear; the
correlations between the independent variables were also examined to check that no large
intercorrelations existed. Also, scatter plots were produced to check for outliers. These were
removed if found to be exerting high leverage.
Stepwise regression was carried out for each of the dependent variables and its candidate
variables, producing a set of equations for use in the model; the goodness of fit for each
equation was indicated by a coefficient of multiple determination (R2). Standardised residual
plots were used in the normal fashion to test each equation for linearity, constant variance,
normality and the independence of the error terms. Outlying points were removed, variables
transformed and the regression repeated where necessary, until acceptable standardised
residual plots were obtained throughout. The equations produced from the statistical analysis
of the Central zone data are presented in Table A1.4. Note that the coefficients have been
generalised and the coefficients of multiple determination omitted to preserve commercial
confidentiality.
A1.4.5 RESULTS
Five of the regression equations (plus the definition equations of opportunity and rescue
PAR) had acceptable R2 values (we chose R2 0.800) and were used in the model. For
example, jobs per service breakdown were found to be a linear function of VFR and
opportunity. However, the equations for productivity and OLOS used the quadratic term of
the number of patrols because the scatter plot of productivity/OLOS against the number of
patrols indicated a non-linear relationship. Productivity also used a combined function of
number of attended service breakdowns and number of patrols, producing a variable
equivalent to opportunity. Also, the equation for recovery demand was transformed with a
1-48
natural logarithm function because the standardised residual plot exhibited signs of nonconstant variance.
Interestingly, of the remaining equations, several emerged from the statistical analysis
without satisfactorily high correlations (i.e. R2 0.800); these were excluded and some
misconceptions about various interdependencies were hence dispelled. Some others were
found to be inappropriate, although well correlated, and so were also excluded.
Table A1.4: Multiple Regression Equations
Dependent Variable
Explanatory Equation
Central Region Costs
= a1
+ x1 Productivity
+ x2 Number of Contractor Jobs
+ x3 Number of Hire, Accommodation, Travel (HAT) Jobs
+ x4 Jobs/Service Breakdown
= a2
+ x5 OLOS
+ x6 ROLOS
+ x7 VFR
+ x9 Rescue PAR
= a3
+ x10 VFR
+ x11 Opportunity
= a4
+ x12 Weather Index
+ x13 Number of Individual Members
+ x14 Number of Motorman Members
+ x15 Number of Fleet Members
= a5
+ x16 Number of Panel Van Patrol Vehicles
+ x17 Number of Lift and Tow Truck Patrol Vehicles
+ x18 Number of Attended Service Breakdowns
+ x19 Recovery Demand
+ x20 Rescue PAR
= a6
+ x22 Geography Index
= a7
+ x23 Desk Time
+ x25 Weather Index
+ x26 (Number of Patrols)2
+ x27 Rescue PAR
= a8
+ x28 Weather Index
+ x29 Number of Individual Members
+ x30 Number of Fleet Members
+ x31 Number of Motor Cycle Patrols
+ x32 Number of Small Van Patrol Vehicles
= a9
+ x34 Weather Index
Number of Patrols
+ x37 (Number of Patrols)2
= a10
+ x39 VFR
+ x41 Number of Motorman Members
+ x42 Weather Index
= a11
+ x43 OLOS
+ x44 Recovery PAR
= a12
+ x45 PGNT
+ x46 Agent (Contractor) Go-Not-Tow (AGNT)
+ x47 Rescue PAR
Customer Satisfaction Index (CSI)
Jobs/Service Breakdown
Number of Attended Service Breakdowns
Number of Contractor Jobs
Number of Patrols
Overall Level of Service (OLOS)
Patrol Go-Not-Tow (PGNT)
Productivity
loge (Recovery Demand)
Recovery Overall Level of Service (ROLOS)
Vehicle Fix Rate (VFR)
A1.4.6 MODEL CONSTRUCTION AND TESTING

Each zone was tested individually for each period using the model equations in an interrelated form and any discrepancies between the actual and calculated values noted. Data for
periods after the time range in study were also used to test the accuracy of the model. This
out of sample accuracy analysis showed that the model performed well, but had a tendency
to overestimate the number of contractor jobs (Table A1.5). This error arose generally
1-49
because the number of contractor jobs was the last in a chain of estimated values and so
relied upon several other estimations. The larger errors that occurred in the estimations for
zone I were traced to the underestimation of productivity (which was unusually high).
Table A1.5 Mean absolute percentage errors for estimated variables using new data
Estimate
Productivity
Rescue PAR
OLOS
VFR
Recovery Demand
Zone Mean Percentage Error

E
F
5.1
1.3
5.1
1.3
0.9
1.9
4.2
1.0
13.9
7.4
9.5
9.2
A
10.5
10.5
7.8
10.0
26.3
43.0
I
9.4
9.4
2.5
8.4
35.0
78.2
The output from the model is shown in Table A1.6. The shaded cells signify user inputs
which are used to calculate performance measures (i.e. opportunity, productivity, etc.)
according to the relationships identified in the multiple regression analysis.
Table A1.6 Model output and logical relationships for periods 1 (P1) to 5 (P5) of 1994
(shaded cells indicate user inputs)
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
A
ZONE A
Number of ASBs
Opportunity
Productivity
Rescue PAR
OLOS
VFR
Recovery Demand
Total Number of Patrols
Number of Motor Cycles
Number of Small Vans
Number of Panel Vans
Number of Lift & Tow Trucks
Geography Index
Weather Index
Total Number of Members
Number of Individual Members
Number of Motorman Members
Number of Fleet Members
Jobs/Service Breakdown
PGNT
AGNT
Desk Time
B
P1 94
3076
205
185
90.14
91.65
79.32
127
458
15
0
11
3
1
36.2
8.7
44407
21500
18243
4664
115.28
86.3
15.3
21
C
P2 94
3923
262
230
87.86
88.53
76.28
169
719
15
0
11
3
1
36.2
10.7
44576
21633
18272
4671
116.5
85.8
10.3
24
D
P3 94
3198
213
192
90.05
94.28
77.60
143
496
15
0
11
3
1
36.2
7.8
44668
21706
18287
4675
115.34
84.8
12.9
18
E
P4 94
3432
229
203
88.93
89.69
76.90
145
577
15
0
11
3
1
36.2
10.2
44681
21739
18287
4655
115.67
86.1
7.2
23
Data collected from

The Weather Log.
D4 = D3 / D11
E5 = a9 + x33 E16 + x34 E17 + x35
F
E22 + x (E3 / E11) + x (E11)2
36
P5 94
3141
209
189
90.45
94.85
72.96
177
502
15
0
11
3
1
36.2
4.9
45191
21832
18756
4603
116.72
79.4
10.2
17
37
F6 = F5 / F4
E7 = a7 + x23 E25 + x24 E16 +

x25 E17 + x26 (E11)2 + x27 E6
D8 = a12 + x45 D23 + x46 D24 +

x47 D6
C9 = e (a10 + x38 C3 + x39 C8 +

x40 C16 + x41 C20 + x42 C17)
B10 = a5 + x16 B14 + x17 B15 +
x18 B3 + x19 B9 + x20 B6
B11 = B12 + B13 + B14 + B15
Data from 1991 UK Census.

B18 = B19 + B20 + B21
1-50
A1.4.7 DISCUSSION
The interview and influence map technique provided a wealth of information about related
factors affecting RACs roadside operation. By contributing to this initial systems stage and
helping to draw the maps, RAC management provided the basis on which the statistical
analysis was carried out and therefore influenced the final model. RAC found that this
modelling methodology, especially the interview and mapping processes, was a fresh and
novel way to elicit information, stimulating new understanding of the business environment.
To completely specify any regression equation the correct choice of independent variables
must be made. Whether an independent variable should be included was indicated by the
influence map and statistical analysis. Clearly, the coefficient of determination will be lower
when a relevant variable is omitted, suggesting a reduction in goodness of fit. In the RAC
model, the primary causes of omitting variables were the inability to quantify certain
influential factors (e.g. the quality of area service manager decision making) and the
availability of data (e.g. condition of members vehicles). The only reasonable way to
overcome these problems would be to collect more relevant data and create some kind of
quantitative measurement scale for qualitative factors.
A1.4.8 CONCLUSIONS
An overall understanding of the main factors influencing the RAC roadside operation was
achieved through effective use of an influence map and the majority of the relationships were
quantified satisfactorily. The high R2 values for the corresponding equations demonstrate
that, independently of one other, they perform well. Unfortunately, using the equations in the
model produced an escalating error term, although testing suggested that the model still
predicts well for the majority of zones. Further study and data collection would improve
accuracy and facilitate better predictions of the individual characteristics of certain zones.
Primarily, the model can be used as a prediction tool for what if? experimentation and to
identify any peculiarities occurring in the roadside operation. Equally, it could be used to test
alternative zone configurations. Management found the model comprehensible because it
produces estimates for the main performance measures produced by CARS. Identifying the
precise relationships between related factors was useful in highlighting areas for
improvement. The management now intend to develop a national model using the same
methodology.
FOR THE INTERESTED READER
Hopper T, Tomlin D (1995), RAC Roadside Operation Model, MSc Thesis, University of
Birmingham.

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1-1

CHAPTER 1: SYSTEMS MODELLING - WHY AND HOW?

1.1 THE SYSTEMS APPROACH AND HOLISM

Andrew Tobias 2015/16

Andrew Tobias 2015/16

Political Discourse, Negotiation, Consultation

Desired Outcomes meeting public..(sectional) interests

Figure 1.1: Systems Thinking as an Approach to Problem Solving Interventions2

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Figure 1.3: Flight Simulator Pedals and Yoke (from CH Products)

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Figure 1.8: Models drawn as Words in Boxes

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1.5. INPUT-OUTPUT ANALYSIS

Track wear data

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Cartoon/Diagrammatic (rather than purely textual)

The main steps in producing rich pictures should be

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Low profits for

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Old Network &

Figure 1.11: Rich Picture: Whats Wrong with Britains Railways?5

They are produced in four steps.

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5. Define criteria for

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order of magnitude approximation,

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Figure 1.15 Growth of Market Share by Inter-Personal Contacts

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The internal-influence model therefore certainly seems good, and of course it is

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Where should system boundaries be drawn?

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Chapter 2: Fundamentals of Discrete Simulation.

Chapter 3: The Dynamics of Stochastic Systems.

Chapter 4: Verification, Validation and Experimentation.

Chapter 6: System Dynamics.

Chapter 7: Resdesigning Systems and Managing Change.

Chapter 8: Operations Management.

Chapter 9: The Pillars of Simulation.

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Eden, C. (1988) "Cognitive Mapping", European Journal of Operational Research volume

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What is the difference between an algorithm and a heuristic?

Discuss the folly of describing (a) participation in a protracted TV gameshow as a

Analyse one of:

whether income can be generated, or indeed wealth created;

describe the nature, development and manifestation of the problem,