Figures and Tables excerpted from

Business Dynamics:
Systems Thinking and Modeling for a Complex World
Chapter 2

John D. Sterman
Massachusetts Institute of Technology
Sloan School of Management

Figures and Tables excerpted from

BUSINESS DYNAMICS: SYSTEMS THINKING AND MODELING FOR A COMPLEX WORLD
John D. Sterman

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Business Dynamics
 A simple model of the automobile market

Figure 2-1
Business Dynamics
 Figure 2-2
Source: Adapted from GM Decision Support Center diagram. Used with permission.

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 Figure 2-3 Policy Analysis
Source: Adapted from GM DSC diagram. Used with permission.

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 Figure 2-4 Bathtub diagram to illustrate the impact of leasing

Source: GM Decision Support Center. Used with permission.

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 Used car prices, 1989-1999
160

150

140

130

120

110
1988 1990 1992 1994 1996 1998 2000

Figure 2-5
Source: US Bureau of Labor Statistics, series CUSROOSETA02

Business Dynamics
 Stock and flow structure of a project phase

Figure 2-6

Source:: Adapted
from a diagram
developed by
Pugh-Roberts
Associates,
Cambridge, MA.

Business Dynamics
 Side effects of corrective measures lead to vicious cycles.

Figure 2-7
Source: Adapted from a diagram developed by Pugh-Roberts Associates, Cambridge, MA.

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 Defect creation and elimination

Figure 2-8

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 Positive feedbacks undercutting planned maintenance

Figure 2-9

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Additional positive feedbacks leading to a reactive maintenance culture

Figure 2-10

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 Results from selected policy simulations

Head Change in
Policy Mix Count Uptime Profit
($ million/year)
0. Typical plant under existing 91 83.5 0.00
policies

1. Use scheduling to minimize 82 83.5 0.35

maintenance costs

2. Minimize costs via full suite of 61 83.5 1.20

proactive maintenance policies

3. Maximize plant profit via full 91 93.3 9.00

suite of proactive maintenance
policies

Table 1-1
Source: Winston Ledet, Park Paich, Tony Cardella, and Mark Downing (1991), “The Value of Integrating the CMLT Key
Pursuits,” Du Pont internal report.

Business Dynamics
 Worse-before-better behavior of maintenance costs at a
typical plant

Figure 2-11
Source: Allen (1993).

Business Dynamics
 Improvement at the Lima refinery
 Lima Refinery pump MTBF up from 12 to 58 months (pump failures down from
more than 640 in 1991 to 131 in 1998). Direct savings: $1.8 million/year.
 Total flare-off of hydrocarbon down from 1.5% to 0.35%. Direct savings:
$0.27/barrel. Improved environmental quality.
 On-line analyzer uptime improvement from 75% and not trusted to 97% and
trusted, permitting real-time optimization of product flow. Savings: $0.10-
0.12/barrel.
 Thirty-four production records set.
 Safety incidents and lost hours cut by factor of 4.
 Cash margin improved by $0.77 per barrel of oil processed.
 Total new value created: $43 million/year. Total cost: $320,000/year.
Ratio: 143:1.
 BP wide learning initiative under way for all other refineries and plants. Over
2000 people from sites in the US, UK, Australia, North Sea, Alaska, and Europe
had participated in the workshop and game by 1998.
Table 2-2
Source: Paul Monus, personal communication; Monus, P. (1997) “Proactive Manufacturing at BP’s Lima Oil Refinery,”
presented at NPRA Maintenance Conference, 20-23 May 1997, New Orleans; and NPRA Maintenance Conference, MC-98-92.

Business Dynamics