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A Publication of WTVP

The decisions facing business managers are becoming increasingly complex, and the ability to identify critical factors and chart out an effective strategy often is beyond the intuitive capabilities of management. One way to evaluate the sustainability of your operating performance criteria or predict the impact of policy decisions in a timely manner is through the use of dynamic simulation modeling.

Multiple factors increase the complexity of the business environment today. Over the last decade, most businesses have seen a tenfold increase of product offerings to customers. The lifecycle of these products and services has been reduced 40 to 50 percent during the same period. This implies that companies need the ability to develop new products in half the time and that this window is becoming increasingly smaller. In addition, sources of supply and competitiveness have shifted from regional to national to global scales. Companies have to serve global markets and tap into global supply pools to remain viable and competitive. Not surprisingly, even the most skilled manager is now challenged by the need to design and implement a highly distributed supply chain under ever increasing pressures of efficiency and effectiveness.

Against this backdrop, the number of variables and uncertainties within the overall context of a global landscape has grown exponentially. To identify critical factors and design effective strategies, management decisions have become either locally optimized to immediate priorities, are based on experience and knowledge derived from past experiences, or are simply limited to guesswork.

Evidence has proven that transforming complex situations into dynamic models that can be exercised substantially helps improve the intuition of these managers. Simulation models help us look at problems as a whole and articulate the complete set of relationships, interactions, and uncertainties. Also, they help us validate our intuition; we see if problems behave as we expect them to or, if not, what some of the additional variables are that affect the business conditions. Consequently, organizations can derive benefit from improved strategies, policies, and risk mitigation plans, allowing management to make proactive and intelligent decisions.

Finally, models eventually help us simplify problems. They help reduce complex business situations into manageable sets of variables that can be used to develop ongoing strategies to be executed.

Dynamic simulation provides an effective means to include all the various internal and external factors that impact a system into a single model, allowing decision-makers to make the right adjustments to the right levers with confidence. Armed with this new insight, leaders can move from a daily tactical decision making and reactionary management style to providing proactive, strategic leadership. IBI

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