Business Dynamics and System

Modeling
Chapter 6: Mapping Stocks
and Flows

Pard Teekasap
Southern New Hampshire
University
 Outline
1.Stock, Flows, and Accumulation
2.Identifying Stocks and Flows
3.Mapping Stocks and Flows
 Diagramming Notation for
Stocks and Flows
•
Stock
• Inflow Outflow
•
• Stock
• Flow
Stock
Inflo w O utflow

• Valve (Flow Regulator)

S to c k
I n f lo w O u t fl o w

• Source or Sink (Stocks

outside model
 boundary)
Stock and Flow
 Equivalent representations of
stock and flow diagram
Hydraulic Metaphor:

Stock and Flow Diagram:

Stock
Inflow Outflow

Integral Equation:
t

Stock (t ) = [Inflow (s ) - Outflow (s )]ds + Stock (t 0)

t0

Differential Equation:

d( St ock) /d t = Net C hange in St ock = Inflow (t ) – O ut flow (t )

 Contribution of Stocks to
Dynamics
• Stocks characterize the state of the
system and provide the basis for
actions
• Stock provide systems with inertia
and memory
• Stocks are the source of delays
• Stocks decouple rates of flow and
create disequilibrium dynamics
Stocks and Flows in different
disciplines

M
 Which one is the stock and
which one is the flow?
• Units of measure in stock and flow
networks
• The snapshot test
 Unit of measure of stocks and
flows
• Stocks are usually a quantity e.g.
widgets of inventory, people
employed, or Dollar in an account
• The associated flows must be
measured in the same units per
time period e.g. the rate at which
widgets are added per week to
inventory, the hiring rate in people
per month
 The snapshot test
• Freeze the system scene with a
snapshot
• Stocks would be things you can
count or measure in the picture,
including psychological states and
other intangible variables
 Identifying stocks, inflows,
outflows
• Completing/Assigning/Homework
• Brownies in
stomach/Eating/Digesting
• Expenses/Income/Money in back
account
• Shrinking/Pinocchio’s
nose/Lengthening
• Building/Nuclear Weapons/Disarming
• Cavities/Developing/Filling
 Conservation of Material
• The contents of the stock and flow
networks are conserved
• Items entering into a stock will
remain there until they flow out
• When an item flows from one stock
to another, the first stock loses
precisely as much as the second
gains
 State-determined systems
• Stock can change only via its inflows
and outflows
• Stocks determine the flows
State of the
System (Stock)
Net Rate of
Change
 Auxiliary Variables
• System requires only stocks and flows.
However, for ease of communication
and clarity, it is helpful to define
intermediate or auxiliary variables
• The auxiliaries can always be
eliminated and mathematically the
same, but it is harder to explain,
understand, and modify
• The use of auxiliary variables is critical
to effective modeling. Ideally, each
equation in the models should
Example of using auxiliary
variables
Population Population
Net Birth Rate Net Birth Rate
+ R ? ?
+ +
-
Fractional B Food per
Food
Birth Rate Capita
+ +

Food
 Stocks change only through
their rates
Customers
Wating for
Service Customer
Curstomer -
Departure Rate
Arrival Rate B- -

In co rre ct
+
Workweek

B
+ Productivity

Service Staff

Customers
Wating for
Service Customer
Curstomer Departure Rate
Arrival Rate + +
B +
+
Workweek

C o rre ct +
B
Productivity

Service Staff
 Should I use mathematical
diagram or stock and flow
diagram
• Depends on the context of the
modeling project you are doing and
the background of your client team
• If your clients have very little
technical training, the bathtub
metaphor is often used to good
effect
 Which detail I should present
and which detail I should lump
it together
• Usually it is wise to identify the main
stocks in a system and then the
flows that alter those stocks
• It is better to start with a high-level,
aggregate representation and add
detail if needed to address the
purpose
• Beginning with detailed process
maps often leads to paralysis due
to their complexity, data
requirements, and rapid
Example of aggregation
Production Start
Rate

Parts in
Process
Assembly Start
Rate

Assemblies
Work in in Process
Process Test Start
Rate
Inventory
Product in
Testing
Production
Completion Rate
Finished
Inventory
Shipment Rate
 Modifying the Model
qModify the diagram to represent the
case where units that fail testing
are scrapped
qModify your diagram to represent the
case where items failing testing are
returned to assembly for rework
 Guideline for aggregation
• For activities taking place serially,
consider the average residence time
of item in each stock. The stock with
short residence times relative to the
time scale for the dynamics of
interest can be omitted or aggregated
into adjacent stocks
• Parallel activities can be aggregated
together if the individual flows are
governed by similar decision rules
and if the time different items spend
Setting the model boundary
• Are the assumptions about the
“clouds” reasonable?
Are these two clouds
reasonable
Source:
Unlimited
Supply of
Material

Production
Starts

WIP
Model
Production Boundary

Finished
Inventory

Shipments

Sink:
Unlimited
Absorption
Capacity
Extending the model scope
Supplier
Production
Starts
Supplier
WIP
Supplier Supplier
Production Sector

Supplier
Inventory
Supplier
Shipments

Parts
Inventory
Production
Starts

Manufacturer
WIP Sector

Production

Finished
Inventory

Shipments

Dealer
Dealer
Stocks
Sector
New Car
Sales
Adding the customers
Shipments

Dealer
Dealer
Stocks
Sector
New Car
Sales

Cars on
the Road Household
Sector
Scrap
Rate