A SYSTEM DYNAMIC SIMULATION MODEL IN THE SYSTEM SUPPORT ORGANIZATION OF A SPEEDY PRINTING COMPANY (ABC/CND/POWERSIM PROJECT)

A Thesis/Project Submitted in Partial Fulfillment For the Degree of Master of Science in Systems Management College of Notre Dame

By Wei-Chen Chung March 6TH, 1999

A System Dynamic Simulation Model in the System Support Organization of a Speedy Printing Company (CND/ABC/Powersim Project) Wei-Chen Chung

Abstract The Capstone Project is based on a group model building project. Group members came from a printing/coping company (ABC), the college of Notre Dame, and Powersim, Incorporated. The group analyzed a speedy printing company (ABC Printing Company) using system dynamic modeling. In this report, I will discuss the methods and solutions that were developed by the ABC/CND/Powersim project team. This project focused on sales and production problems of the ABC printing company. The project team under the guidance of the Powersim representative used the concept of system thinking and the skill of systems dynamic modeling to produce a computer simulation. The simulation software can be used to show forecasting curves of the companys profits and sales peoples revenue over the next five years. A high-level user interface was designed by this author to create a "user friendly" environment for working with the simulation. CND students and the ABC printing company owner can now use the software to successfully explore the outcomes of different business scenarios. The simulation and user interface were evaluated by MSSM students and the owner of the ABC Printing Company. Introduction In the real world, structures of an organization have become complex. Therefore, we need to understand whole systems of the organization that can help us to make decisions for the organization. In this project, I will discuss an optimized way to understand an organization. When I took the Master of Science in Systems Management program, I tried to explore methodologies that could help me to understand systems management. When I took my second course, I made a project about air traffic controlling using the concept of system dynamics which was a very useful organization learning concept for me. I was an air traffic controller during my military service in Taiwan. I saw many air near-collision events that were caused by poor management. If the concept of system dynamics can be applied in air traffic management, many high-risk events would be avoided. Of course, system dynamics can support different business decisions. I began participation in the "ABC/CND/Powersim" group project with Dr. Sylvia Shafto beginning in the spring, 1998. The project needed to use the concept of system dynamics to analyze the business decisions of ABC Printing Company. In this group project, I understood more ideas about system dynamics and learned the skill of using the system simulation software.

The purpose of the ABC/CND/Powersim project is to develop solutions that support ABC Printing Company using system dynamics model building. I will use the following steps to provide my capstone project: I. II. III. Project group background, meetings, and workshops Project problems Project model-building process

I. Project group background, meetings, and workshops The ABC/CND/Powersim project team includes three groups: the College of Notre Dame (CND), ABC printing company, and Powersim, Incorporated. The College of Notre Dame was partnering with ABC printing company and Powersim Corporation to develop a computer modeling simulation based on system dynamics to be used by CND's MBA and MSSM graduate programs. The development of this real-world tool allows CND students to simulate outcomes of business scenarios. By moving to implement such a technology with the graduate program, CND can further support high technology-based educational tools in its program. ABC/CND/Powersim project team used two meetings to get the project development started. I also attended a two-day workshop to understand Powersim simulation software. The first meeting (August 13th, 1998) In the first meeting of ABC/CND/Powersim, we developed our project criteria: 1. Model is to be used in educating students in CND's MBA and MSSM courses 2. Model is to be used in limited capacity by ABC Printing company 3. Model must be dynamic, including circumstances played out over time According to the project criteria, we decided on the project concepts and problem areas to focus on for the ABC/CND/Powersim project: 1. Staffing -- support the company through its workforce/staffing decisions. This may include analysis regarding sales per employee, retention, motivation and turnover. We may also develop the idea of sales force vs. production along with crossfunctional work teams. 2. Outsourcing -- enable the company to maximize its potential through outsourcing. The second meeting (August 28th, 1998) In the second meeting of ABC/CND/Powersim, we studied the framing question: What are the key issues facing ABC Printing company in managing sales and production staff over the next 5 years? The owner of the ABC Printing Company supplied the group with an excellent set of past five-year business data for the company. This provided the real-word basis for the model and simulation.

We figured out the significant issues (Appendix A). According to the issues for ABC Company, we have developed the model for the company. In this paper, I will describe the details of the model structure. Powersim Workshop (September 14 & 15th at Crown Plaza, S.F.) ABC/CND/Powersim project uses Powersim to develop the system dynamic simulation model. For this reason, I attended Powersim "Introduction to Business Modeling and Simulation with Powersim Constructor" workshop on September 14 and 15th at Crown Plaza, San Francisco. The following are the features of the workshop. 1. Focus on business problems quickly using simulation tools 2. Analyze and communicate solutions and strategies more effectively using models 3. Analyze possible solutions by constructing a model and experimenting with some components: inventory control, product life cycle planning, capacity planning, human resource and finance. In the workshop, I learned the fundamentals of building problem-solving models and simulations. With the help of presentations, hands-on workshops, a case study and a step-by-step development process, I developed business models and simulations that could solve real problems. After the workshop, I understood Powersim. Powersim is a simulation software, and it is similar to iThink and Versim. Powersim is a Windows based software package for creating system dynamics models and custom-designed business simulators. Powersim can be used as the basis for creating management flight simulators which permit interactive experimentation with such issues as corporate strategy, operations, marketing, competitive analysis, and decision-making. Powersim can be used to create simulations across a wide spectrum of industries and business areas, such as: 1. Strategic planning 2. Resource management 3. Crisis planning and management, and process reengineering. II. Project problems The ABC/CND/Powersim project needs to solve sales and production problems. There are three main problems: "Strengths", "Weaknesses", and "Issues facing companys business future". In "Strengths", the project needs to identify the companys acquisitions and growth. The results will give the decision-maker information to make decisions and take actions easily. In "Weaknesses", the project needs to recognize the companys problems. The "weaknesses" questions include "high labor cost" and "problems with staff balance department by department". In "Issues facing companys business future", there are three challenges that need to be faced. 1. What will be the companys profit during the next five years? 2. Will products of the company become profitable during the next five years? 3. How much sales revenue will be received during next five years?

The final solutions would focus on "Sales revenue", "Profit", and "Profitability" for ABC Printing Company. In the next part of this paper, I will analyze the processes that were used to develop the project by the ABC/CND/Powersim project group. III. Project model-building process "Group model-building is an approach which involves the client consensus and creates commitment with the outcomes" (Vennix, 1996. p.110). I will use the following stages to provide the model-building process of ABC/CND/Poersim project: 1. 2. 3. 4. 5. Problem identification and model purpose System thinking and System dynamics Model formulation and analysis Simulation Application Software for ABC/CND/Powersim Evaluation and Feedback

1. Problem identification and model purpose I think that a group model-builder feels sufficiently confident to start with problem identification. ABC/CND/Powersim developed the problem identification and model purpose in our first meeting on August 13th, 1998. I have described the problem identification and model purpose in the part of "Project group background, sessions, and workshops". After defining the problem identification during the second meeting, the participants of ABC/CND/Powersim were invited to write down variables in silence. Each variable was written on magnetic hexagon (Figure 1) and put on a metal board.

Figure 1. Use of Hexagons in ABC/CND/Powersim to Group Model-building.

There are nine key areas that are included the ABC/CND/Powersim model. Management:

Production:

Industry Changes:

Production Cycle Time:

Equipment Costs & Purchase Decisions:

Physical plant & facilities:

Production Staff:

Sales Force:

Customers Relations:

2. System thinking and System dynamics The issue maps (Hexagons) tend to point to the interconnectedness of events. The issue maps are translated into a causal loop diagram (Figure 2). This implies the causal relations among elements. The interconnectedness events of ABC printing company are a complex system (Figure 1).

System dynamics has its fundamentals in the field of systems thinking, and it was founded in 1956 by MIT professor Jay Forrester (Appendix C). I learned the concept of systems thinking in the organizational Theory with Mr. Moran. When I read the book "The Fifth Discipline" (Senge, 1994) that was written by Peter Senge, I had gotten the clear concept about systems thinking. "Systems thinking is a discipline for seeing the 'structures' that underlie complex situations, and for discerning high from low leverage change" (Senge, 1994 p.69). Systems thinking is powerful because it can help people to see their own mental models and how those models color their perception of the real world. The situations of the whole system in ABC Company are changing over time, and the system has a dynamic behavior that is a consequence of its structure. We have talked of the system elements and their interconnections. Senge, talks about two types of complexity. They are detail complexity and dynamic complexity. Detail complexity is associated with systems that have many component parts. Dynamic complexity is associated with systems that have cause and effect separated by time and space. Dynamic complexity determines system's behavior over time.

I learned the concept of systems dynamics in my second course of MSSM, Deterministic Models in Decision Making with Dr. Sylvia Shafto. I am very interested in system dynamics. I think the main concept of systems dynamics is to model system structure and behavior using the principles of feedback, dynamics and simulation. The following characteristics describe uses of system dynamics modeling: 1. Search for useful solutions for real world problems. 2. Use computer simulation models to improve and understand such systems. 3. Base the simulation models on mental models, qualitative knowledge and numerical information. 1. Seek improved methods to translate simulation results into actual implementation. According to Forrester, system dynamics is a theory of the behavior and structure of complex systems. The structure of system dynamics has four hierarchical levels: 1. 2. 3. 4. the closed boundary the feedback loop as the basic system component levels and rates goals, observed conditions, discrepancy between goals and observed conditions, and desired action.

3. Model formulation and analysis The basic ABC Printing Company model was developed in a group modeling session. The Powersim representative led the group through the process of specifying the elements of the model and the algebraic relations. The structure of ABC/CND/Powersim model is a very complex organization. I use a mathematical method to evaluate the system dynamics of this model. I include the whole ABC/CND/Powersim model that is a mathematical equation (Appendix E). It is a combination of many differential equations. The structure of the model includes three main sections, and they are "Production", "Sales", and "Equipment". Powersim's system dynamic simulation software shows the solutions of the structure. I compare the equations, flow-stock diagram (Appendix D) and causal loop (Appendix C) diagram in the following. "Production" section Flow-stock diagram:

Figure 3. flow-stock diagram of "PoductionStaff".

Equation: ProductionStaff = -(ProductionStaffAttrition)dt +(ProductionStaffHires)dt ProductionStaffAttrition = ProductionStaff *ProductionStaffAttritionRate ProductionStaffHires = MAX(0,(DesiredWorkforce-ProductionStaff+ (ProductionStaffAttrition*TimeToHireProductionStaff))/ (TimeToHireProductionStaff+TimeToMakeStaffingDecisions))

Causal loop diagram:

Figure 4. causal loop diagram of "PoductionStaff".

The structure is a "Shifting the Burden" archetype (Senge, 1994). A Shifting the Burden structure is composed of two balancing loops and a reinforcing loop. Both structures end up moving the system in a direction other than the one desired. The graph shows the effect on Production Staff of this structure in the model is:

Figure 5. Curves of "PoductionStaff".

This structure also affects two results "TotalProductionStaff" and "ProductionStaffCosta". The flow-stock diagram and equation of "TotalProductionStaff" is:

Figure 6. Flow-stock diagram of "TotalProductionStaff". Equation: TotalProductionStaff = ARRSUM(ProductionStaff) The ARRSUM function computes the sum of the value of the elements in an array ("ProductionStaff"). The result of the curve for "TotalProductionStaff" is (Figure 7):

Figure 7. The curve of "TotalProductionStaff"

The flow-stock diagram (Figure 8)and equation of "ProductionStaffCosta" is:

Figure 8. The flow-stock of " ProductionStaffCosta" ProductionStaffCosts = ProductionStaff(a)*(AvgProductionSalary(a)+ProductionTrainingCosts) where a=ProductionGroups The result of the curve for " ProductionStaffCosts " (Figure 9) is:

Figure 9. Curve for "ProductionStaffCosts"

"Sales" section: Flow-stock diagram (Figure 10):

Figure 10. The flow-stock diagram of "Sales" section The structure is also a "Shifting the Burden" archetype.

Equation: NumberOfSalesPeople = -dt*SalesPeopleAttrition +dt*SalesHires SalesPeopleAttrition = NumberOfSalesPeople*SalesforceAttritionRate SalesHires = (DesiredSalesForce-NumberOfSalesPeople SalesPeopleAttrition*TimeToHireSalesPeople))/TimeToHireSalesPeople Causal loop diagram (Figure 11): +

Figure 11. The causal loop diagram of "Sales" The result of the curve for " NumberOfSalePeople " (Figure12) is:

Figure 12. The curve of "NumberOfSalePeople The output of this structure affects two results "SalesForceCosts" and "TotalSalesForceInvoices", and those equations reference Appendix E. Their curves are figure 13:

Figure 13. The curves of "SalesForceCosts" and "TotalSalesForceInvoices" "Equipment" section: Flow-Stock Diagram:

Figure 14. The flow-stock diagram of "Equipment" section There are two important equations in "Equipment" section, and they are "FacilitiesSize" and "EquipmentCapacity". "FacilitiesSize" is a "Reinforcing" structure, and "EquipmentCapacity" is a "Shifting the Burden" archetype. Equation:

(1) FacilitiesSize = +dt*ChangeInFacilitiesSize FacilitiesSize = Facilities size initial is 2500 square feet. (2) EquipmentCapacity = NeededCapacity*2 EquipmentCapacity = -dt*CapacityDepreciation +dt*NewCapacity EquipmentCapacity = 128,000 copies per eight hour day for four machines operating 50 weeks per day time five days per week. Causal Loop Diagram:

Figure 15. The causal loop diagram of "Equipment" section

The curve of "FacilitiesSize" is:

Figure 16. The curve of " FacilitiesSize" The value of "FacilitiesSize" is keeping 2,500 square feet. The curve of "EquipmentCapacity" is:

Figure 17. The curve of "EquipmentCapacity" Equipment costs "EquipmentCosts" is an output value that affects the profits and profitability in whole model. The equation of "EquipmentCosts" is: EquipmentCosts = InitialEquipmentCosts/ INIT(EquipmentCapacity)* EquipmentCapacity The curve of "EquipmentCosts" is:

Figure 18. The curve of "EquipmentCosts" These three sections ("Production", "Sales" and "Equipment") are major key elements of the model. Sales revenue, profitability, and profits and solutions that ABC/CND/Powersim project group wants to get. I will describe the flow-stock diagrams, the equations, the causal loop diagrams, and the curves of their solution in the following. Flow-stock diagrams:

Figure 19. The flow-stock diagram of "SalesRevenue", "Profits", and "Profitability" The equations: SalesRevenue = AvgInvoice * TotalInvoices Profits = SalesRevenue - TotalCosts Profitability = Profits / SalesRevenue

The causal loop diagram:

Figure 20. The causal loop diagram of "SalesRevenue", "Profits", and "Profitability" The curves of "SalesRevenue", "Profits", and "Profitability":

Figure 21. The curves of "SalesRevenue", "Profits", and "Profitability" If the growth rate of "SalesRevenue" is greater than the growth rate of "Profits", "Profitability" should decline. The curves of these components are the solutions that we want to get. 4. Simulation Application Software for ABC/CND/Powersim The Powersim simulation application software allows the developer to design a "friendly" graphical user interface (GUI). This is a program interface that can be easily handled by users. I will use the concepts of the two MSSM courses Decision Support System, and Person Machine Factors to provide the application software. Decision Support System The Powersim application software supports decision-makers of ABC printing company to make their decisions, and the application software is a very successful tool for developing a decision support system.

According to the generic framework of decision support system, a decision support system (DSS) can be defined in terms of four basic aspects: 1. 2. 3. 4. A language system (LS) A presentation system (PS) A knowledge system (KS) A problem-processing system (PPS) (p. 172 Holsapple, 1996)

ABC/CND/Powersim simulation application software is a simulation tool for ABC printing company that can forecast the company sales revenue, profits, and commercial profitability for the next five years. The structure of the simulation application software is shown in the following:

Figure 22. The structure of ABC/CNS/Powersim DSS

ABC/CND/Powersim is a Rule-Oriented DSS. 1. LS: data input 2. PS: Advice solution (forecasting curves, time table) 3. KS: Flow-stock diagram (system dynamics language) 4. PPS: System dynamics model Structuredness: This application software is for multiple use. Input: User can define data entry.

Output: Curves, time table for analysis. Feedback on output: Help user situation analysis

User Interface Design using Person Machine Factors: I developed the high-level user interface for the ABC Printing Company simulation. Students and business decision makers cannot interact easily with the modeling version of the simulation. So the Powersim software allows the developer to create a simpler, more easily used interface. The Powersim simulation application software addresses the concerns of person machine factors for designing high-level user interface. It allows the developer to create Windows GUI, and each function is based on object-oriented interface. The menu of the application software interface uses buttons, and the buttons are three-dimensional. Users can easily select any window they want. Each button is contains text that easily identifies an action. The control is activated when "pressed" by users. The ACB/CND/Powersim simulation was constructed using combinations of colors in the software interface that allows users to easily identify highlighted buttons in a window interface. We used the harmonious color combinations in the software interface. The colors combination: Windows Background colors Foreground colors Menu White Gray Help Teal White Simulation White Non White Input/Table White Black, Teal, Blue, Magenta Other colors combinations reference Appendix F. In the input window of the software, I used slider/bar to control each of the input variables. Users can benefit from viewing the current value relative to range of all possible values. The output results are used dynamic curves to display on the simulation window. Decision-makers (users) can quickly get the forecasting information for the next five years. The interfaces of the ABC/CND/Powersim simulation are shown the following: "Menu" and "Help" Windows

Figure 23. "Menu" and "Help" Windows of ABC/CNS/Powersim software. "Data Input" Window

Figure 24. "Data Input" Window of ABC/CNS/Powersim software.

"Simulation" Window

Figure 25. "Simulation" Window of ABC/CNS/Powersim software.

"Table" Window

Figure 26. "Table" Window of ABC/CNS/Powersim software. "Causal Loop" Window

Figure 27. "Causal Loop" Window of ABC/CNS/Powersim software.

"Model" Window

Figure 28. "Model" Window of ABC/CNS/Powersim software. The simulation not only combines the concepts of Decision Support Systems and Person Machine Factors, but uses the skill of software engineering. It is not only a case study, but is also a CASE (computer-aided software engineering) tool. This project supports reengineering and enterprise level analysis techniques. Organizational reengineering is the evaluation and redesign of ABC printing company's business processes, data, and technology. "The goals of reengineering are to achieve dramatic improvements in quality, service, speed, use of capital, and reduced costs" (Conger, 1994, p. 113). The following diagram is the reengineering target for ABC/CND/Powersim project:

The main sources of organization are people and information of ABC/CND/Powersim project group. Data from ABC Printing Company is represented in the variables in the model. Technology is the system dynamics concept and skill. ABC printing company is a speedy growth organization, and CND uses system management knowledge to develop a group model with Powersim business simulation software. The product of ABC/CND/Powersim group project is the user-friendly simulation application software.

5. Evaluation and Feedback When ACB/CND/Powertsim simulation application software was almost done, I demonstrated the application software twice in the courses SY269 (Decision Support and Expert Systems) and SY221 (Deterministic Models in Decision-Maker) on February 27th and March 1st, 1999. I got very good feedback from both two evaluations (ABC/CND/Powersim Evaluation form reference Appendix G). The summary of the first evaluation: 1. The software needs more factors/input. 2. The model needs to be more realistic. Needs to have more functions (only five functions) which the user can vary. 3. Easy to understand the result. 4. The workforce size can not be changed and should be adjustable.

I got 80% negative feedback asking for improvements. I have updated some problems, and Dr. Sylvia Shafto gave me other opportunity to demonstrate the software. The following shows example responses on the evaluation of the second model: 1. 2. 3. 4. 5. Conclusion ABC/CND/Powersim modeling project has applied the concept of system thinking and the skill of system dynamics modeling to develop a group model. The whole project involved group model building. ABC/CND/Powersim project group identified the problems and model purpose, analyzed the model formulation, developed simulation application software, and tested the software. The user interface was improved based on the feedback from demonstrations. Base on the feedback, the simulation application software has been updated. System dynamics simulation model is a very useful and interesting concept for organization learning, and it combines system thinking and system dynamics. This idea not only supports business decisions, but also can be used in different areas. I believe system dynamics simulation will be generally applied in the next century. For this reason, I have chosen the concept for my capstone project. Software works well. The model is excellent. Too complex. Good. The user interface is easier to use than Vensim.

Reference Bailey, Robert W. (1996). Human Performance Engineering: Designing High Quality Professional for Computer Products, Application and System. Upper Saddle River, NJ: Prentice-Hall, Inc. Byrkness, Arne-Helge (1996). Powersim Tutorial 1. Herndon, VA: Powersim Co. Byrkness, Arne-Helge & Myrtveit,Magne (1996). Learning Dynamic Modeling. Herndon, VA: Powersim Co. Conger, Sue (1994). The New Software Engineering. Belmont, CA: International Thomson Publishing. Cover. Jennifer M. (1996). Introduction to System Dynamics. Herndon, VA: Powersim Co.

Galitz, Wilbert O. (1997) Essential Guide to User Interface Design. New York: John Wiley & Sons, Inc. Hannon, Bruce, & Ruth, Matthias. (1994). Dynamic Modeling. Urbana, IL: Springer-Verlag New York, Inc. Holsapple, C., & Whinston, A. (1996). Decision support systems: A knowledge-based approach. San Francisco, CA: West Publishing Company. McCleod, Raymond (1998). Management Information Systems. Seventh Edition. New York: Prentice Hall, Inc. Senge, Peter (1994). The Fifth Discipline: The Art and Practice of the Learning Organization. New York: Doubleday. Vennix, Jac A. M. (1996). Group Building: Facilitating Team Learning Using System Dynamics. West Sussex, England: John Wiley & Sons Ltd.

Appendix A ABC/CND/Powersim 8/28/98 Meeting The following were the significant issues identified by the group using the hexagons. Management Number of decision makers Internal communication efficiency What is a good profit margin Speed of decisions Locus of decision making Net profit (profitability) Number of management layers Production Number of jobs per day Productivity and capacity utilization Industry changes Jobs lost to competitors Competition from large printing companies Digital technology direction Production Cycle Time Client response time Bottleneck is in the prepress Speed of decision making

Equipment costs & purchase decisions

Equipment cost General and administrative costs Fixed costs Cost of buy versus lease

Sales Force

Staff morale Sales attrition Costs of outside sales force Sales goal per employee Employee incentives Company sales goal Number of sales people to be trained Employee rewards

Physical plant & facilities

Location Sales/square foot Consolidation of locations facilities Rental vs. business Outsourcing facilities (sales/sq. foot) $200$300/sq. foot Acquisition of independent printer company Customer attractiveness Growth leads to inefficiencies

Production Staff

Quality of new hires Quality of existing staff

Number of temporary workers Employee training/year Attrition of production employees Employee incentives Staff morale Cost of prepress staff Payroll cost goal Cost of outsourcing vs. in-house Customer relations Specificity of services offered Breadth of services offered Pick up and delivery service Customer satisfaction Quality of product Loss of sales Customer retention/repeat sales Customer loyalty

Appendix B

Causal loop diagram

"Production" section:

"Equipment" section:

"Sales" section:

Relation among "Profits", "Profitability" and "SalesRevenue":

Appendix C

Germeshausen Senior Lecturer

Professor

Emeritus BS '39,

of Electrical

Management Engineering

University of Nebraska, MIT, SM '45, Electrical Engineering

Forrester, who invented random-access magnetic-core memory during the first wave of modern digital computers, also pioneered the field of system dynamics -- analysis of the behavior of systems. He pursues three main interests based on system dynamics: the System Dynamics National Model, which generates the major observed modes of economic behavior; a new management education based on the inherent, dynamic complexity of all the related parts of a corporation and brings them into a unified system; and system dynamics as a methodology for giving cohesion, meaning, and motivation to pre-college education. Jay W. Forrester is Germeshausen Professor Emeritus and Senior Lecturer at the Sloan School of Management, Massachusetts Institute of Technology. He began his career as an electrical engineer working on servomechanisms and large-scale digital computers. While Director of the MIT Digital Computer Laboratory from 1946 to 1951, he was responsible for the design and construction of Whirlwind I, one of the first high-speed digital computers. In 1956, Professor Forrester started the System Dynamics Group at the Sloan School and with it, the field of system dynamics. The five books he has written on system dynamics are available through Pegasus Communications in Waltham, Massachusetts. Along with many writing and speaking commitments, Professor Forrester is currently working on the National Model Project, a large computer model of the U.S. economy. He is also the director of the System Dynamics in Education Project (SDEP), which is developing ways to use system dynamics and computer modeling as a foundation for a new kind of kindergarten through 12th grade education. The SDEP project at MIT is writing Road Maps which is a guide to learning system dynamics.

Appendix D

Appendix E EquipmentCapacity init EquipmentCapacity = NeededCapacity*2 flow EquipmentCapacity = -dt*CapacityDepreciation +dt*NewCapacity doc EquipmentCapacity = 128,000 copies per eight hour day for four machines operating 50 weeks per day time five days per week. FacilitiesSize init FacilitiesSize = 2500 flow FacilitiesSize = +dt*ChangeInFacilitiesSize doc FacilitiesSize = Facilities size initial is 2500 square feet. NumberOfSalesPeople init NumberOfSalesPeople = 1 flow NumberOfSalesPeople = -dt*SalesPeopleAttrition

+dt*SalesHires dim ProductionStaff = (ProductionGroups) ProductionStaff init ProductionStaff = InitProductionStaff flow ProductionStaff = -dt*ProductionStaffAttrition +dt*ProductionStaffHires CapacityDepreciation aux CapacityDepreciation = EquipmentCapacity/CapacityLife CapacityDepreciation aux ChangeInFacilitiesSize = (DesiredFacilitiesSize-FacilitiesSize)/TimeToMove NewCapacity aux NewCapacity = MAX(0,(DesiredCapacity-EquipmentCapacity + (CapacityDepreciation*TimeToAddNewCapacity))/TimeToAddNewCapacity) dim ProductionStaffAttrition = (ProductionGroups) ProductionStaffAttrition aux ProductionStaffAttrition = ProductionStaff*ProductionStaffAttritionRate dim ProductionStaffHires = (ProductionGroups) ProductionStaffHires aux ProductionStaffHires = MAX(0,(DesiredWorkforce-ProductionStaff + (ProductionStaffAttrition*TimeToHireProductionStaff)) / (TimeToHireProductionStaff+TimeToMakeStaffingDecisions))

SalesHires

aux SalesHires = (DesiredSalesForce-NumberOfSalesPeople + (SalesPeopleAttrition*TimeToHireSalesPeople)) / TimeToHireSalesPeople SalesPeopleAttrition aux SalesPeopleAttrition = NumberOfSalesPeople*SalesforceAttritionRate AverageRevenuePerSalesPerson aux AverageRevenuePerSalesPerson = SalesForceInvoices*AvgInvoice AvgInvoice aux AvgInvoice = IF(TIME>1995,120,120) doc AvgInvoice = Estimate CapacityUtilization aux CapacityUtilization = NeededCapacity/EquipmentCapacity CostOfGoodsSold aux CostOfGoodsSold = TotalInvoices*VariableCostsPerInvoice DesiredCapacity aux DesiredCapacity = NeededCapacity/(1-DowntimeFraction) DesiredFacilitiesSize aux DesiredFacilitiesSize = INT(EquipmentCapacity / INIT(EquipmentCapacity)+0.5)*INIT(FacilitiesSize) DesiredSalesForce aux DesiredSalesForce = IncrementalRevenue/INIT(AverageRevenuePerSalesPerson) dim DesiredWorkforce = (ProductionGroups) DesiredWorkforce aux DesiredWorkforce = TotalInvoices/ProductionStaffProductivity

EffectOfCommisions aux EffectOfCommisions = GRAPH(AverageRevenuePerSalesPerson /INIT(AverageRevenuePerSalesPerson) ,0,0.2, [2,1.94,1.84,1.67,1.41,1,0.74,0.6,0.53,0.5,0.5"Min:0;Max:2;Zoom"]) EffectOfCommisions aux EffectOfCustomerSatisfactionOnInvoices = EffectOfPriceOnCS * EffectOfQualityOnCS*EffectOfServiceOnCS

EffectOfMoraleOnQuality aux EffectOfMoraleOnQuality = DELAYINF(Morale, TIMESTEP, 1,1) EffectOfPriceOnCS aux EffectOfPriceOnCS = GRAPH(AvgInvoice/INIT(AvgInvoice),0,0.2, [4,3.89,3.46,2.35,1.47,1,0.48,0.23,0.14,0.05,0.05"Min:0;Max:4;Zoom"]) EffectOfQualityOnCS aux EffectOfQualityOnCS = GRAPH(EquipmentQuality* NormalizedProductionTraining*EffectOfMoraleOnQuality,0,0.2, [0,0.07,0.24,0.65,0.89,1,1.04,1.07,1.09,1.1,1.1"Min:0;Max:2;Zoom"]) EffectOfServiceOnCS aux EffectOfServiceOnCS = GRAPH(PerceivedCycleTime/ INIT(PerceivedCycleTime),0,0.2,[4,3.84,3.32,2.25,1.51,1,0.67,0.47,0.36,0.29, 0.21,0.19,0.14,0.14,0.12,0.12,0.12,0.11,0.11,0.07,0.05"Min:0;Max:4;Zoom"]) EffectOfWorkloadOnMorale aux EffectOfWorkloadOnMorale = GRAPH(ProductionWorkload,0,0.2,

[0.61,0.61,0.61,0.64,0.75,1,1.11,1.11,0.77,0.65,0.64"Min:0;Max:2;Zoom"]) EquipmentCosts aux EquipmentCosts = InitialEquipmentCosts/INIT(EquipmentCapacity)* EquipmentCapacity doc EquipmentCosts = About $2700 for copiers and $2700 for press per month. FixedCosts aux FixedCosts = OtherFixedCosts+EquipmentCosts doc FixedCosts = This came from P&L Statement from 1995, Colorado. IncrementalRevenue aux IncrementalRevenue = RevenueGoal-(NonSalesForceRelatedInvoices* AvgInvoice) InitialEquipmentCosts aux InitialEquipmentCosts = InitialEquipmentUnitCost*Year doc InitialEquipmentCosts = About $2700 for copiers and $2700 for press per month. LaborCosts aux LaborCosts = ARRSUM(ProductionStaffCosts)+SalesForceCosts doc LaborCosts = This came from P&L Statement from 1995, Colorado. Morale aux Morale = EffectOfWorkloadOnMorale NeededCapacity aux NeededCapacity = TotalInvoices*CopiesPerInvoice NonSalesForceRelatedInvoices aux NonSalesForceRelatedInvoices = 700000/INIT(AvgInvoice)*

EffectOfCustomerSatisfactionOnInvoices doc NonSalesForceRelatedInvoices = In 1994, $700,000 in sales occurred without the help of the sales force. NormalizedProductionTraining aux NormalizedProductionTraining = ProductionTrainingCosts/ INIT(ProductionTrainingCosts) NormalTimeToHireSalesPeople aux NormalTimeToHireSalesPeople = HireRateForSalesPeople/Year OtherFixedCosts aux OtherFixedCosts = 800000*27%-INIT(EquipmentCosts)+ (FacilitiesSize*AnnualCostPerSquareFoot) PerceivedCycleTime aux PerceivedCycleTime = DELAYINF(ProductionCycleTime, 1/4,1,NormalCycleTime) ProductionCycleTime aux ProductionCycleTime = ((TotalInvoices/TotalProductionStaff)/ (INIT(TotalInvoices)/INIT(TotalProductionStaff)))*NormalCycleTime*Morale ProductionStaffCosts dim ProductionStaffCosts = (a=ProductionGroups) aux ProductionStaffCosts +ProductionTrainingCosts) ProductionStaffProductivity dim ProductionStaffProductivity = (ProductionGroups) aux ProductionStaffProductivity = INIT(TotalInvoices)/InitProductionStaff*Morale ProductionWorkload = ProductionStaff(a)*(AvgProductionSalary(a)

aux ProductionWorkload = ((TotalInvoices/TotalProductionStaff)/ (INIT(TotalInvoices)/INIT(TotalProductionStaff))) doc ProductionWorkload = 1= Normal Work Load Profitability aux Profitability = Profits/SalesRevenue

Profits aux Profits = (SalesRevenue-TotalCosts) RevenueGoal aux RevenueGoal = GRAPH(TIME,1994,1,[800000,950000,1000000,1070000, 1140000,1210000,1290000,1340000,1390000,1430000,1450000" Min:0;Max:1500000;Zoom"]) SalesforceAttritionRate aux SalesforceAttritionRate = 1*EffectOfCommisions SalesForceCosts aux SalesForceCosts = NumberOfSalesPeople*(AverageSalaryOfSalesPerson+ (SalesForceInvoices*AvgInvoice*SalesForceIncentives)+TrainingCosts) SalesForceInvoices aux SalesForceInvoices = NormSalesforceInvoices* EffectOfCustomerSatisfactionOnInvoices SalesRevenue aux SalesRevenue = AvgInvoice*TotalInvoices TimeToHireSalesPeople

aux TimeToHireSalesPeople = EffectOfCommisions*NormalTimeToHireSalesPeople TotalCosts aux TotalCosts = CostOfGoodsSold+FixedCosts+LaborCosts TotalInvoices aux TotalInvoices = NonSalesForceRelatedInvoices+TotalSalesForceInvoices TotalProductionStaff aux TotalProductionStaff = ARRSUM(ProductionStaff) TotalSalesForceInvoices aux TotalSalesForceInvoices = SalesForceInvoices*NumberOfSalesPeople TotalWorkforce aux TotalWorkforce = NumberOfSalesPeople+ARRSUM(ProductionStaff) AnnualCostPerSquareFoot const AnnualCostPerSquareFoot = 12 AverageSalaryOfSalesPerson const AverageSalaryOfSalesPerson = 1200*12 doc AverageSalaryOfSalesPerson = Average salary of sales force in 1994. AvgProductionSalary dim AvgProductionSalary = (ProductionGroups) const AvgProductionSalary = [30000,15600,30000] doc AvgProductionSalary = Full Time Equivalents. Press people and pre-press people and managers make on average $12 per hour. Bindery and copier operators and drivers make $7.50 per hour. Roughly 2/3 of the people are $12 and 1/3 are 7.50 = about 10.50 per hour.

CapacityLife const CapacityLife = 7 doc CapacityLife = This is a mix of 3 - 4 years for a copier and longer for the press. CopiesPerInvoice const CopiesPerInvoice = INIT(AvgInvoice)/.05 DowntimeFraction const DowntimeFraction = 10% EquipmentQuality const EquipmentQuality = 1 HireRateForSalesPeople const HireRateForSalesPeople = 1 InitialEquipmentUnitCost const InitialEquipmentUnitCost = 11000 InitProductionStaff dim InitProductionStaff = (ProductionGroups) const InitProductionStaff = [2,4,2] NormalCycleTime const NormalCycleTime = 4.5 doc NormalCycleTime = Days for printing NormSalesforceInvoices const NormSalesforceInvoices = 800000/120/8 doc NormSalesforceInvoices = The sales person did 12.5% of total sales in 1994. ProductionStaffAttritionRat

dim ProductionStaffAttritionRate = (ProductionGroups) const ProductionStaffAttritionRate = [.67,.5,1]

ProductionTrainingCosts const ProductionTrainingCosts = 500 doc ProductionTrainingCosts = 2 days of training per person per year, $150 per person, =300, $200 for their time = $500 per person per year. SalesForceIncentives const SalesForceIncentives = 10% doc SalesForceIncentives = Sales force incentives per person TimeToAddNewCapacity const TimeToAddNewCapacity = 1/12 TimeToHireProductionStaff dim TimeToHireProductionStaff = (ProductionGroups) const TimeToHireProductionStaff = [0.083,0.04,0.083] TimeToMakeStaffingDecisions dim TimeToMakeStaffingDecisions = (ProductionGroups) const TimeToMakeStaffingDecisions = [0.167,0.167,0.167]*0 TimeToMove const TimeToMove = TIMESTEP TrainingCosts const TrainingCosts = 840 doc TrainingCosts = 4 days of training per year, $150 per day of training. $1200 a

month salary, 20 working days in a month, 1/5 x 1200 = 240 240 + 600= 840 VariableCostsPerInvoice const VariableCostsPerInvoice = (27%*800000/INIT(TotalInvoices)) doc VariableCostsPerInvoice = This came from P&L Statement from 1995, Colorado. Year const Year = 12

Appendix F

Appendix G ABC/CND/Powersim Evaluation Form Do you like the software? Why?Is it realistic model?What do you think about results from the project?What do you think about the design of the project? Text/Content Organization Performance Graphics Additional comments or recommendations: