1. airo University
aculty of Computers & Information
epartment of Decision Support
C
F
D
imulation Software Packages
S
Re-Exam 2006/2007
Duration: 3 hrs
First Question: The scope of system dynamics
System dynamics is useful in many modeling circumstances, but not all. Describe a
realistic problem in which system dynamics would not be the best approach to solve the
problem. That is, describe a problem in which an alternative modeling approach has
important advantages. Do not select a problem which cannot be solved or modeling is
impossible.
Second Question: Case Study
The year 1991 marked a series of firsts for PC-PLUS, an established IBM-PC clone
manufacturer. That year, PC-Plus experienced its first quarterly loss ($20 million), its
first round of layoffs (1700 people), and the first departure of a chief executive. These
were not the kinds of records PC-Plus was used to posting. In the late 1980s, the
company created a sensation in the business world by growing to $1 billion in sales
faster than any other American firm in history. But then the early 1990s saw PC-Plus
losing market share to other clone makers and struggling to stay on top.
PC-Plus initial strategy had been simple: Build IBM-compatible computers that cost
about the same as the competition but that either performed better or offered extra
features. PC-Plus's engineering strength, combined with its marketing savvy, jumpstarted its early success. The company could command premium prices by offering
technologically sophisticated products. But in 1991, customers began perceiving PCPlus's products as over priced, and questioned the company's leadership role in
engineering break through. In 1986, PC-Plus had leaped ahead of its biggest rival by
bringing out the first IBM-compatible machine using a new, faster microchip. But in

2. 1991, PC-Plus sat on the sidelines while three other clone makers announced their own
new machines with an improved microprocessor. These competitors asked customers
why they should pay PC-Plus's high prices; and the customers listened.
To maintain its success and to reduce its financial pressure, PC-Plus needed to
approximate its competitors' prices without losing its reputation for quality. PC-Plus
remedy plan was to keep costs down by buying more parts from outsiders. A reduction
in costs, would increase PC-Plus's profits, hence alleviating PC-Plus's financial
pressure. However, some analysts worried that this plan would hurt the company's
premium-brand image. PC-Plus would appear to be "just another clone", which would
dramatically affect PC-Plus's sales, which in turn would significantly impact PC-Plus's
profits.
The key variables in the PC-Plus story are:
1. Costs
2. Profits
3. Financial Pressure
4. Brand image
5. Sales
6. Use of Outside Suppliers' Parts
Draw a simple two-loop diagram to describe both PC-Plus remedy plan, and the
unintended consequence that some analysts are worried from.
Remember to:
o Label links (+ or -).
o Label loops (R or B).
Third Question
Consider the inventory model drawn below. Assume the production rate is equal to the
gap (between desired and actual inventory) divided by the adjustment time (AT). Given
the behavior of the desired inventory (shown below), sketch the behavior of the
inventory and production rate. Assume that inventory initially equals the desired
inventory & AT = 14.4 time units.

3. Inventory
Desired_Inventory
Adjustment_Time
Desired_Inventory
Production_Rate
2,000
1,500
1,000
0
5
Gap
Question 8:
Write all equations for the model portrayed in the following figure
10 15 20 25 30 35 40
Time