"Increase Profit Causal Loop - PowerPoint"
Gloucester Community Development Corporation 1 Challenges • “You cannot build a model without a good understanding of the system you are going to simulate…” Jim Hines 2002 2 Purpose of Today’s Presentation • Share some insights in using SD for client projects • Ask you for a peer-group review, i.e. which part of the following presentation could lead into a publishable paper? 3 The Team Our Client: Dr. Carmine Gorga, Executive Director GCDC Dr. Steve Kelleher, Marine Institute Massachusetts Dr. Damon Cummings, a former Professor of hydrodynamics and control theory at MIT Joe Sinagra, Fishermen MIT: Jeroen Struben, PhD Student MIT SangHyun Lee, M.S Student Intelligent Engineering MIT Peter Otto, PhD Student UAlbany 4 Agenda • Introduction to the Project • A Step-by-step approach towards a model – Decomposition of the system – Reflection of current situation and Problem Definition – Key Variables • Scope and understanding – Dynamic Hypotheses – Overview on the different Sectors • Model initiation: building one Dynamic hypothesis – Model Components – Base model Behavior 5 Gloucester’s Business Goal To establish a commercialized fisheries operation Gloucester Fish, Inc. that utilizes a novel process that extracts fairly pure protein from underutilized fish species to potentially increase their value in an effort to revitalize the present fishing industry in Gloucester. 6 Surimi? A substitute for crab meat…. 7 Surimi Market • Total market: 760,000 metric tons, growing at 10 – 20% per year • Japan represents 60 % of the market • Desired output for Gloucester’s surimi factory is 10,000 metric tons 8 Phase 1: Learning Demand Fishing fleet Launch and operate • Potential market-size • # Fishermen • Desired capacity • Product attractiveness • # boats needed for Surimi • Startup costs • Unit price • Total # boats • Total Capacity • Attractiveness of other fishing • Extendibility targets • Marketing efforts Product characteristics • Total fishing capacity • Total labor provision • Marketability • Willingness to join • FDA approval time • Product quality (grade) • Earnings per Fisherman • Total Sales • Product diversity • Area utilization • Diversification • Unit costs • Effectiveness • Profitability • Total catch Finance and Community,.. Competition • Cost per trip • Total value added • Barriers to entry • Equipment extension cost • Directional • Number of competing • Private investor fraction ports Resources • Risk of disintegration • Total competing capacity • Water availability • Employee involvement • Accessibility of cross • Water costs per unit waters • Reinvestment fraction • Water pollution • Government taxes • Perceived fish stocks • Community acceptance • Actual fish stocks • Sustainable Yield • Community concerns 9 Phase 2: Reflection • Meeting with client to confirm problem statement and initial reference modes 10 Problem Statement “Objective” • The decline of traditional fish species and the curtailing of fishing efforts by the Government require the fishing industry of Gloucester to identify alternative resources to sustain their industry… …A Surimi factory – harvesting fast renewable fish stock – should compensate for the missing revenues from traditional white fish until their stock returns to a sustainable level… 11 Problem recognition … a response to a downward spiral… • Dynamics of “Total Potential for harvesting” is defined by the combined availability of and capacity for dark and white fish Total Revenues Revenues from White Fish Revenues from Surimi 1996 2002 2005 2012 t 12 Problem Statement • Sustainability of Community depends on total revenues, stability, spread of revenues Community QoL H: Enough renewable resources (both white and dark) • Reinvestment in plant • Rising stability reinforces happiness F1: Too much success • Increasing revenues, • Increasing competition, • Stock depletion, •Unequal/unfair profits F2: Lack of throughput • No Market 1992 2002 2012 t • Delays in takeoff • Competition from other communities or • Fish stock takes longer to renew 13 Key Variables Operations Sector Community Sector Potential Factory Output Revenues from Fishing Potential Demand Sustainability of community Potential Return on Attractiveness to Join Investment Co-operation Resource Sector Fleet Composition Total allowable Catch (TAC) # Fleet Days at Sea 14 Phase 3: Agreement • Presentation of dynamic hypothesis • Definition for the scope of the project 15 Dynamic Hypothesis • Potential Factory output: The potential factory output should be determined by the availability of fish stock. Pushing the system based on the attractiveness will finally limit the factory output. Potential factory + output + Potential factory Desired factory output output Reinv est in factory + + - Fishing rate Rev enues from large boats Rege nera tion time factory of fish stock - + R + B Large boats in Attracti veness Total catc h Acctual factory harbor Li mi tati on thro ugh drives o utput natural co nstra ints output + + + t Av ailable fish stock Fleet days at sea - Attractiv eness + for pelagic + Perceiv ed fish stock 16 Dynamic Hypothesis • Revenues per boat: If operating profit of the factory is positive, it can reinvest in equipment and processing capabilities to increase attractiveness and effectiveness, which could cause too much pressure on the fish stocks. Revenues Curtailing from Pressure on s tock per boat gov e rnment - - + Rev enues per B + Operating R Rev enues per large boat small boat + profit Pressure on fish stock Influence from + + gov ernment + Total re v enues Rege nera tion time R Effec tiv eness of of fish stock Av ailable stock large boats R - Attractiveness + Attractiv eness for + + Effectiveness in-shore fish + Operating profit Pressure on t + fish stock + Fraction to reinv est in Processing capabilities for in + equipment and factory shore-fish c atch 17 Dynamic Hypothesis • Revenues from fishing: Revenues can go up and remain high at sufficient re-investment in the plant, in order to maintain diversity in input and output. External partners might lead to high volume low quality through put Potential + Local Surimi Surimi Market Demand Total Revenues R3 + from fishing B3/R5*) Diversificat ion R4 Attractiveness Dark Fish for Surimi + Surimi Catc h Supply Byproducts + + B1 + + Surimi Attractiveness for Dark Fish Troughput R1-3 + B2 R4 Capacity Expansion Drift + 1992 2002 2012 t + Revenues from Revenues Surimi Plant - per Partner + B1 Decreasing Joining Marginal Partners Revenues + + Attractiveness 18 to Join FI Dynamic Hypothesis • Sustainability of Community: Too much success of the plant, can bring some revenues, while many have to fish for the low-stock white fish + Changeovers to R2 + Dark Fish Financial Entranc Barrier Inequalit y Community B2 R1 + QoL B1 - Dark Fish Attractiveness Dark Fish - Catc h + Increasin g Scale B1 + Surimi + Surimi B1 Revenues White Fishermen Throughput R1 Revenues Dark and White R2 + Balance - White Fish White Fish 1992 2002 2012 t Catc h Yield + White Fish - + Stoc ks B2 Deplet ion 19 Phase 4: Conceptualizing the model • First draft was presented to the client to: – Confirm the causal loop diagram – Focus on sensitive variables and parameters – Re-define scope of the model 20 The Dynamic Hypotheses around the key variables have been merged into three sectors • Resource Sector • Community Sector • Operations Sector Variables and links in Dynamic hypotheses themselves, generally cover more sectors!! 21 Resource Sector Curtailing from gov e rnment + - + Operating profit Total B3 + allow able catch Rege neration time Desired factory Rege neration time w hite fish + + pelagic stock Fraction to output Av ailable w hite fish - reinv est in factory stock (quota) + - + Potential factory - + Av ailable pelagic output R1 + Fishing rate w hite stock (quota) - + - Effec tiv eness of fish (da ys at sea) + Fishing rate Pelagic fish pelagic boats (days at se a) stock B2 + B1 - Processing capabilities for B5 + + in-shore fish catch Pressure on + Attractiv eness pelagic stock w hite fish + + - # Large # Large Total catch boats fishing + - boats fishing pelagic w hite fish pelagic + + - White fish Attractiv eness for - stock in-shore fish B4 - Catch per - pelagic boat + + Catch per boat - + Number of Attractiv eness of Total catch small boats pelagic stock w hite fish B6 - + + Pressure on w hite Total catch from + fish stock + small boats 22 Community Sector Diversification Reinvestment to + Incubator + + Job Value + Attractiveness Provis ion Local Surimi for Surimi Added R Demand Byproducts + + Plant Capacity + + Total Operation + + Partners Costs Desired Capacity + - + External - Attractiveness to + Revenues per Join + + Partner Revenues from - Surimi Plant Co-operatio + + B - + Surimi n Fishermen Revenues per R + Troughput Co-operation - Fisherman + + Relative + + + Surimi Attractiveness For Fishermen + Fishermen to Join Revenues Entrance Financial Barrier Investment to Join + + - + + Boat Pelagic - - Co-operation Effec tiveness + Attractiveness Boat + Partners Financial Barrier - Changeover to Adapt Boat Revenues Costs per Private Fisherman R + R + Pelagic - + + Catc h - Private - - - Fishermen + - Pelagic Boat Private White White Fish + Co-operation Stoc ks Effec tiveness Fish Catch Stoc ks Individuals Fishermen White Fish Catch - + + + + White Fish 23 Yield Operations Sector White fi sh attracti veness + Chan geover to - + pel acig fi sh Fi shi ng rate for + + Resource suppl y whi te fish + Revenu es from + whi te fish + + + Pel agi c fish Pel agi c fish ca tch Processi ng White fi sh catch attracti veness + capabi li ti es for + + i n-shore fish catch + + Actual factory output Desi red fa ctory + + Pel agi c fish stock output Actual demand + - + + + Factory Pressure on revenues pel agic fi sh + + + + Rei nvest in fishing + Rei nvest to product equi pment Fi shi ng rate pelagi c Potential de mand + + Product Potential facto ry attravti veness + output + Rei nvestment i n factory + Factory capacity + + Potential return on + i nvestment - Op erating cost Effectiven ess of l arge boats 24 We have used the “Potential Factory Output” hypothesis as a starting point for the model The model of the hypothesis is built up of three main loops: • Factory Capacity and Output • Fleet Capacity • Resource Dynamics Other hypotheses will be constructed on top of this 25 Dynamic Hypothesis • Potential Factory output: The potential factory output should be determined by the availability of fish stock. Pushing the system based on the attractiveness will finally limit the factory output. Potential factory + output + Potential factory Desired factory output output Reinv est in factory + + - Fishing rate Rev enues from large boats Rege nera tion time factory of fish stock - + R + B Large boats in Attracti veness Total catc h Acctual factory harbor Li mi tati on thro ugh drives o utput natural co nstra ints output + + + t Av ailable fish stock Fleet days at sea - Attractiv eness + for pelagic + Perceiv ed fish stock 26 Reinvestment Frac tion Reinvestment in Factory + Reinvestmen t Funds + Reinvestment Factory Revenues Rate Capacity Growth per - + Invested Dollar - + + + + Funded Desired Surimi Capacity Production Capacity + + Capacity Shortage + - B Production Surimi Surimi Sales + Capacity Demand + Growth Factory R Surimi Capacity Time To Increasin g Surimi Pric e Expand Ret urns t o Scale per Unit + Maximum Surimi Actual Factory Factory Output Output + Surimi + Production + 27 Reinvestment Frac tion Reinvestment in Factory + Reinvestmen t Funds + Factory Reinvestment Rate Revenues Capacity Growth per - Invested Dollar - + + + + + Funded Desired Surimi Capacity Production Capacity Surimi + Sales + + Capacity + Shortage + B Production Surimi - Demand Capacity Growth Surimi Pric e + Factory per Unit R Surimi Capacity Actual Factory Time To Increasing Output Demand Expand Ret urns t o Scale Multiplier + + + Maximum Surimi Factory Output + Surimi Production + + Actual Boat Size of Pelagis Pelagic Need per Efficiency Fleet Year R + + Th roughput Pelagic Capacity + Matching Capacit y per Year Pelagic Required + Harvest Capacity Utilization Rate + Working Days p + Year Actual Capac ity + Allowed Boat Utilization Pelagic Fleet Maximum Days Utilization + + Capacity at Sea per Year + 28 Reinvestment Frac tion Reinvestment in Factory + Reinvestmen t Funds + Factory Reinvestment Rate Revenues Capacity Growth per - Invested Dollar - + + + + + Funded Desired Surimi Capacity Production Capacity Surimi + Sales + + Capacity + Shortage + B Production Surimi - Demand Capacity Growth Surimi Pric e + Factory per Unit R Surimi Capacity Actual Factory Time To Increasing Output Demand Expand Ret urns t o Scale + Multiplier + + Maximum Surimi Factory Output + Surimi Production + + + Frac tional Actual Boat Size of Pelagis Pelagic Need per Pelagic Efficiency Fleet Death Rate Year Natural Deaths B + R + + + Available Th roughput Pelagic + Relative Pelagic Capacity + Matching Capacit y Stoc k per Year Density Pelagic Required + + Capacity Harvest Utilization Rate B Pelagic + + + Births + Working Days p Year + Actual Capac ity + Frac tional Allowed Boat Utilization Pelagic Fleet Birth Rate Maximum Days Utilization + + Capacity at Sea B per Year + Yield + 29 Basic model Behavior 1. Basic Demand – Step demand increase towards 15000 Surimi in the 10th month 2. Resource Depletion – Same case, with a lower fertility of pelagis 30 Basic Demand: Factory Capacity Capacity Utilization 20,000 MTO/Year 600 MTO/(Year*Month) 8M $ 15,000 MTO/Year 450 MTO/(Year*Month) 6M $ 10,000 MTO/Year 300 MTO/(Year*Month) 4M $ 5,000 MTO/Year 150 MTO/(Year*Month) 2M $ 0 MTO/Year 0 MTO/(Year*Month) 0 $ 0 6 12 18 24 30 36 42 48 54 60 66 72 78 84 90 96 102 108 114 120 Time (Month) Surimi Demand : BaseDemand MTO/Year Factory Surimi Capacity : BaseDemand MTO/Year Capacity Shortage : BaseDemand MTO/Year Funded Capacity : BaseDemand MTO/Year Production Capacity Growth : BaseDemand MTO/(Year*Month) Reinvestment Funds : BaseDemand $ 31 Basic Demand: Pelagic Throughput Pelagic Throughput 20,000 MTO/Year 20 M $/Year 15,000 MTO/Year 15 M $/Year 10,000 MTO/Year 10 M $/Year 5,000 MTO/Year 5 M $/Year 0 MTO/Year 0 $/Year 0 6 12 18 24 30 36 42 48 54 60 66 72 78 84 90 96 102 108 114 120 Time (Month) Surimi Demand : BaseDemand MTO/Year Pelagic Fleet Capacity at Sea : BaseDemand MTO/Year Pelagic Harvest Rate : BaseDemand MTO/Year Surimi Production : BaseDemand MTO/Year Surimi Sales : BaseDemand $/Year 32 Basic Demand: Resource Dynamics Pelagic Resource Control 4,000 MTO/Month 800,000 MTO 2 Dmnl 3,000 MTO/Month 700,000 MTO 1.75 Dmnl 2,000 MTO/Month 600,000 MTO 1.5 Dmnl 1,000 MTO/Month 500,000 MTO 1.25 Dmnl 0 MTO/Month 400,000 MTO 1 Dmnl 0 6 12 18 24 30 36 42 48 54 60 66 72 78 84 90 96 102 108 114 120 Time (Month) Pelagic Harvest Rate : BaseDemand MTO/Month Available Pelagic Stock : BaseDemand MTO Relative Density : BaseDemand Dmnl 33 Lower Resource Fertility: Resource Depletion Pelagic Resource Control 4,000 MTO/Month 600,000 MTO 2 Dmnl 3,000 MTO/Month 450,000 MTO 1.5 Dmnl 2,000 MTO/Month 300,000 MTO 1 Dmnl 1,000 MTO/Month 150,000 MTO 0.5 Dmnl 0 MTO/Month 0 MTO 0 Dmnl 0 12 24 36 48 60 72 84 96 108 120 132 144 156 168 180 192 204 216 228 240 Time (Month) Pelagic Harvest Rate : LowBirthRate MTO/Month Available Pelagic Stock : LowBirthRate MTO Relative Density : LowBirthRate Dmnl Dynamics can be very sensitive to resource parameters 34 Learning’s along the way Insights Comments / Issues • A clear problem statement can act • A clear, true problem statement is itself as true insight crucial. This implies effective kick- off meeting(s) and being in the • Quote:“Opportunities for inshore driver-seat fishing?!” • Early involvement of true- • Quote: “Looking ahead to stakeholders / knowledge experts is understand potential pitfalls has crucial for a good (mental) model never been done before” • Using reference modes and causal • Quote: “Visualizing the connections loop diagrams makes it much easier between the variables helped us to for the client to understand the better understand the dynamics in problems and dynamics the system” 35 Your Task • Which part of this project would be of interest for a broader SD community, i.e. do you think we could hit a placement in the SD Review? 36