1 Gloucester Community Development Corporation. 2 Challenges “You cannot build a model without a...

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Gloucester Community Development Corporation

2

Challenges

• “You cannot build a model without a good understanding of the system you are going to simulate…”

Jim Hines 2002

3

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?

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The Team

Our Client:

Dr. Carmine Gorga, Executive Director GCDC

Dr. Steve Kelleher, Marine Institute Massachusetts

Dr. Damon Cummings, a former Professor of hydrodynamicsand 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

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• 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

Agenda

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Gloucester’s Business Goal

TTo 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.

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Surimi?

A substitute for crab meat….

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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

9

Phase 1: Learning

Fishing fleet• # Fishermen• # boats needed for Surimi• Total # boats• Attractiveness of other fishing

targets• Total fishing capacity• Willingness to join• Earnings per Fisherman• Area utilization• Effectiveness• Total catch• Cost per trip• Equipment extension cost

Resources• Water availability• Water costs per unit• Water pollution• Perceived fish stocks• Actual fish stocks• Sustainable Yield• Community concerns

Demand

• Potential market-size

• Product attractiveness

• Unit price

Product characteristics

• Marketability

• Product quality (grade)

• Product diversity

• Unit costs

Competition• Barriers to entry• Number of competing

ports• Total competing capacity• Accessibility of cross

waters

Launch and operate• Desired capacity• Startup costs• Total Capacity• Extendibility• Marketing efforts• Total labor provision• FDA approval time• Total Sales• Diversification• Profitability

Finance and Community,..• Total value added• Directional• Private investor fraction• Risk of disintegration• Employee involvement• Reinvestment fraction• Government taxes• Community acceptance

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Phase 2: Reflection

• Meeting with client to confirm problem statement and initial reference modes

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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…

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• Dynamics of “Total Potential for harvesting” is defined by the

combined availability of and capacity for dark and white fish

Revenues fromSurimi

t

Revenues fromWhite Fish

1996 2002 2005 2012

Total Revenues

Problem recognition… a response to a downward spiral…

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• Sustainability of Community depends on total revenues, stability, spread of revenues

Community QoLH: Enough renewable resources (both white and dark)• Reinvestment in plant• Rising stability reinforces happiness

F2: Lack of throughput• No Market• Delays in takeoff• Competition from other communities or• Fish stock takes longer to renew

t1992 2002 2012

F1: Too much success • Increasing revenues,• Increasing competition, • Stock depletion, •Unequal/unfair profits

Problem Statement

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Key Variables

Resource Sector

Fleet Composition

Total allowable Catch (TAC)

# Fleet Days at Sea

Community Sector

Revenues from Fishing

Sustainability of community

Attractiveness to Join Co-operation

Operations Sector

Potential Factory Output

Potential Demand

Potential Return on Investment

Key Variables

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Phase 3: Agreement

• Presentation of dynamic hypothesis • Definition for the scope of the project

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Potential factoryoutput

t

• 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.

Desired factoryoutput

Fishing ratelarge boats

Fleet days at sea

Perceived fishstock

Available fish stock

Total catch

Regeneration timeof fish stock

+

+-

+

+

-

B

Acctual factoryoutput

Attractivenessfor pelagic

Revenues fromfactory

Reinvest in factory


Large boats inharbor

-

+

+

+

+

+

++

R

Limitation throughnatural constraints

Attractivenessdrives output

Dynamic Hypothesis

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Revenues per boat

t

• 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.

Operating profit

Revenues perlarge boat

Revenues persmall boat

Total revenues

Operating profit

Fraction to reinvest inequipment and factory

Effectiveness oflarge boats

Processingcapabilities for inshore-fish catch

Attractiveness forin-shore fish

+

+

+

+

+

+

+

+

+

R

R

Pressure onfish stock


Curtailing fromgovernment

+

+

+-

Available stock

Pressure on stock

-

+-

BR

Influence fromgovernment

Effectiveness

Attractiveness

Pressure on fish stock

Dynamic Hypothesis

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Total Revenues from fishing

t1992 2002 2012

R4

B2

R1-3

B1

B3/R5*)

Attractivenessfor Surimi

Byproducts

Revenuesper Partner

Revenues fromSurimi Plant

Attractivenessto Join FI

PotentialSurimi

Market

+

+

Local SurimiDemand

+

JoiningPartners

+

SurimiSupply

SurimiTroughput

+

++

Attractivenessfor Dark Fish

Dark FishCatch

+

+

Capacity

+

+

DecreasingMarginalRevenues

B1

R4

Expansion Drift

+ R3

Diversification

-

+

• 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

Dynamic Hypothesis

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• Sustainability of Community: Too much success of the plant, can bring some revenues, while many have to fish for the low-stock white fish

Dynamic Hypothesis

Dark FishCatch

White FishCatch

White FishStocks

-

White FishYield + +

Dark FishAttractiveness

SurimiThroughput

+

-

Changeovers toDark Fish+

+

FinancialEntrancBarrier

White FishermenRevenues

+

-

+

SurimiRevenues

+

+

B2

Depletion

-

R1

Increasing Scale

B1

Dark and WhiteBalance

Inequality

R2

Community QoL

t1992 2002 2012

R1

B1

B1B2

R2

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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

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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!!

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Resource Sector

Totalallowable

catch

Fishing rate(days at sea)


Pelagic fishstock

Attractiveness ofpelagic stock

Regeneration timepelagic stock

Regeneration timewhite fish

Curtailing fromgovernment

# Largeboats fishing

white fish

# Largeboats fishing

pelagic

Number ofsmall boats

Operating profit

Fraction toreinvest in factory

Processingcapabilities for

in-shore fish catch

Attractiveness forin-shore fish

Pressure on whitefish stock

Available white fishstock (quota)

Available pelagicstock (quota)

+

+

+

Pressure onpelagic stock

-

-

+-

Fishing rate whitefish (days at sea)

+

-

+

Attractivenesswhite fish

Catch perpelagic boat

-

+Catch per boat

-

+-

-

--


+

+

+

+

+

Effectiveness ofpelagic boats

+

+

+

+

+

+

+

+

White fishstock

-

-

B1

B2

R1

B3

B4

B5

-

B6

-

-

Total catchwhite fish

Total catch fromsmall boats

+

+

+

+

Total catchpelagic

+

+

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Community Sector

PelagicCatch

White FishStocks

White FishYield

+

PelagicAttractiveness

Financial Barrierto Join

SurimiFishermenRevenues

+

Attractivenessfor Surimi

Byproducts

Revenues perPartner

Revenues fromSurimi Plant

ExternalAttractiveness to

Join

EntranceInvestment

++

Local SurimiDemand

TotalPartners

+

SurimiTroughput

+ +

-

+

Reinvestment toIncubator

JobProvision

Diversification

+

+

+

Co-operationBoat

ChangeoverCosts

PlantCapacity

RelativeAttractiveness ForFishermen to Join

Co-operation Fishermen

+

+

+

Financial Barrierto Adapt Boat

-

-

-

OperationCosts

+

-

+

Revenues perCo-operation

Fisherman

+

+

Co-operationFishermen White

Fish Catch

+

+

+

-

Revenuesper PrivateFisherman

-

PrivateFishermen

--

BoatEffectiveness

Partners

BoatEffectivenessIndividuals

+

+

+

DesiredCapacity

+

-

+

ValueAdded

+

+

Private WhiteFish Catch

+

+

++

-

-PelagicStocks

-

++

+

+- -

+

+

+

-

R

RB

+

R

R

+

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Operations Sector

Revenues fromwhite fish

White fish catch

Fishing rate forwhite fish

White fishattractiveness

Processingcapabilities for

in-shore fish catch

Pelagic fishattractiveness

Factoryrevenues

Reinvestment infactory

Reinvest in fishingequipmentReinvest to product

Productattravtiveness

Potential demand

Actual demand

Actual factory output

+

++

+

+

+

+

+

+

Factory capacity



+

+

+ +

Pelagic fish catch

Pelagic fish stock

Pressure onpelagic fish

Effectiveness oflarge boats

Potential return oninvestment Operating cost

+

+

Fishing rate pelagic

++

-

+

+

+

-

+

++

++

Resource supply

+++Changeover to

pelacig fish

++- +++

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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

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t

• 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.


Fishing ratelarge boats

Fleet days at sea

Perceived fishstock

Available fish stock

Total catch


+

+-

+

+

-

B

Acctual factoryoutput

Attractivenessfor pelagic

Revenues fromfactory

Reinvest in factory


Large boats inharbor

-

+

+

+

+

+

++

R

Limitation throughnatural constraints

Attractivenessdrives output

Dynamic Hypothesis

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Actual FactoryOutput

FactorySurimi

Capacity

SurimiProduction

+

SurimiSales

B

Factory Revenues

SurimiDemand

+

+

+

+

ProductionCapacityGrowth

Desired SurimiProduction Capacity

CapacityShortage

+

-

R

IncreasingReturns to Scale

Surimi Priceper Unit

+

ReinvestmentFraction

Maximum SurimiFactory Output

+

+

+

Capacity Growth perInvested Dollar

Reinvestment Funds

-

+Reinvestment

Rate

Reinvestment inFactory

Time ToExpand

+

FundedCapacity

+

++

-

+

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Size of PelagisFleet

Pelagic FleetCapacity at Sea

Pelagic Need perYear

Maximum Daysper Year

PelagicHarvest

Rate+


FactorySurimi

Capacity

SurimiProduction

+

SurimiSales

B

ThroughputMatching Capacity

FactoryRevenues

SurimiDemand

+

+

+

+



CapacityShortage

+

-

R


Actual BoatEfficiency

Actual CapacityUtilization

+

Pelagic Capacityper Year

++

+


+



++

+

+

+


Reinvestment Funds

-

+Reinvestment

Rate


Time ToExpand

+

FundedCapacity

+

++

-

+

Working Days pYear

+

DemandMultiplier

+

R

RequiredCapacityUtilization

+

+

Allowed BoatUtilization

+

+

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AvailablePelagicStock

Size of PelagisFleet

Pelagic FleetCapacity at Sea

Pelagic Need perYear

Maximum Daysper Year

PelagicNaturalDeaths

Yield

PelagicHarvest

Rate

RelativeDensity

+

++


FactorySurimi

Capacity

SurimiProduction

+

SurimiSales

B

ThroughputMatching Capacity

FactoryRevenues

SurimiDemand

+

+

+

+



CapacityShortage

+

-

R


B

B

Actual BoatEfficiency

Actual CapacityUtilization

+

+

Pelagic Capacityper Year

++

+


+



++

+

+

+


Reinvestment Funds

-

+Reinvestment

Rate


Time ToExpand

+

FundedCapacity

+

++

-

+

FractionalBirth Rate

FractionalDeath Rate

+

+

+

+

Working Days pYear

+

DemandMultiplier

+

R

PelagicBirths

+

+RequiredCapacityUtilization

+

+

B

Allowed BoatUtilization

+

+

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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

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Basic Demand: Factory CapacityCapacity Utilization

20,000 MTO/Year600 MTO/(Year*Month)8 M $




0 MTO/Year0 MTO/(Year*Month)0 $

0 6 12 18 24 30 36 42 48 54 60 66 72 78 84 90 96 102 108 114 120Time (Month)

Surimi Demand : BaseDemand MTO/YearFactory Surimi Capacity : BaseDemand MTO/YearCapacity Shortage : BaseDemand MTO/YearFunded Capacity : BaseDemand MTO/YearProduction Capacity Growth : BaseDemand MTO/(Year*Month)Reinvestment Funds : BaseDemand $

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Pelagic Throughput

20,000 MTO/Year20 M $/Year




0 MTO/Year0 $/Year

0 6 12 18 24 30 36 42 48 54 60 66 72 78 84 90 96 102 108 114 120Time (Month)

Surimi Demand : BaseDemand MTO/YearPelagic Fleet Capacity at Sea : BaseDemand MTO/YearPelagic Harvest Rate : BaseDemand MTO/YearSurimi Production : BaseDemand MTO/YearSurimi Sales : BaseDemand $/Year

Basic Demand: Pelagic Throughput

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Pelagic Resource Control

4,000 MTO/Month800,000 MTO

2 Dmnl


1.75 Dmnl


1.5 Dmnl


1.25 Dmnl

0 MTO/Month400,000 MTO

1 Dmnl

0 6 12 18 24 30 36 42 48 54 60 66 72 78 84 90 96 102 108 114 120Time (Month)

Pelagic Harvest Rate : BaseDemand MTO/MonthAvailable Pelagic Stock : BaseDemand MTORelative Density : BaseDemand Dmnl

Basic Demand: Resource Dynamics

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Dynamics can be very sensitive to resource parameters

Pelagic Resource Control


2 Dmnl


1.5 Dmnl


1 Dmnl


0.5 Dmnl

0 MTO/Month0 MTO0 Dmnl

0 12 24 36 48 60 72 84 96 108 120 132 144 156 168 180 192 204 216 228 240Time (Month)

Pelagic Harvest Rate : LowBirthRate MTO/MonthAvailable Pelagic Stock : LowBirthRate MTORelative Density : LowBirthRate Dmnl

Lower Resource Fertility: Resource Depletion

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Learning’s along the way

Insights• A clear problem statement can act

itself as true insight

• Quote:“Opportunities for inshore fishing?!”

• Quote: “Looking ahead to understand potential pitfalls has never been done before”

• Quote: “Visualizing the connections between the variables helped us to better understand the dynamics in the system”

Comments / Issues • A clear, true problem statement is

crucial. This implies effective kick-off meeting(s) and being in the driver-seat

• Early involvement of true-stakeholders / knowledge experts is crucial for a good (mental) model

• Using reference modes and causal loop diagrams makes it much easier for the client to understand the problems and dynamics

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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?

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