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This paper presents a new approach to modelling automation systems based on the combination and mutual transformation of IEC61499 Function Blocks and MATLAB Simulink. The reason for such transformation is the natural complementarity of these two models: MATLAB Simulink/Stateflow provides a nice environment for modelling and simulation of control and embedded systems, while Function Blocks are good for designing distributed control systems. An integrated software simulation environment with this transformation ability between these two tools will lead to a solution for the validation need for Function Blocks. This paper uses a motor example to demonstrate the transformation from a Simulink model to a Function Block model in Function Block Development Kit (FBDK). We discuss important issues of model transformation, such as semantics mapping, execution priorities and some guidelines for this transformation approach. An observer approach is introduced in order to make comparison of the results. This approach can also be used as part of the software simulation environment with the transformation approach.