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In this paper, a System Dynamics (SD) computer simulation model was developed to assess the effects of developing and providing an alternate water source on the management of a water supply system and customer satisfaction. A water supply service satisfaction index was also developed to estimate the level of overall customer satisfaction on water supply service. Data from the Busan water supply authority and the Korea Development Institute regarding the Nakdong riverbank filtration development were utilized for the construction of the model. Major managerial indicators of the system under study were analyzed by the simulations of the model that incorporates the development of the alternate water source for Busan. The developed SD model and the water service index may be further utilized as a tool that can assess the extent and timing of an additional service improvement project.