This paper illustrates the activity of. dynamic design analysis of construction machinery in Komatsu. The purpose of this activity is reduction of the development cost and time for a new product by using system dynamic simulation techniques before establishing a prototype. The emphasis is on the introduction of a versatile computer program system developed for system simulation and on its application to construction machinery. Furthermore, the applicability of a new technique proposed in this paper to analyze non-linear phenomena is discussed. The aim of this discussion is to improve the accuracy of system simulation.