SIMULATION MODEL

Ryan Jeffrey P. Curbano, CIE

Department of Industrial Engineering
Simulation Model
Learning Objectives
 Tackle a wide variety of problems using simulation.
 Understand the seven steps of conducting a simulation.
 Explain the advantages and disadvantages of
simulation.
 Develop random number intervals and use them to
generate outcomes.
 Understand alternative computer simulation packages
available.
History of Simulation
 The history of simulation goes back 5,000 years, to Chinese
war games, called weich’i. Then, in 1780, the Prussians used
the games to help train their army. Since then, all major
military powers have used war games to test out military
strategies under simulated environments
 From military or operational gaming, a new concept, Monte
Carlo simulation, was developed as a quantitative
technique by the great mathematician John von Neumann
during World War II. Working with neutrons at the Los
Alamos Scientific Laboratory, von Neumann used simulation
to solve physics problems that were too complex or
expensive to analyze by hand or by physical model
 The random nature of the neutrons suggested the use of a
roulette wheel in dealing with probabilities. Because of the
gaming nature, von Neumann called it the Monte Carlo model of
studying laws of chance
 With the advent and common use of business computers inthe
1950s, simulation grew as a management tool. Specialized
computer languages were developed in the 1960s (GPSS and
SIMSCRIPT) to handle large-scale problems more effectively
 In the 1980s, prewritten simulation programs to handle situations
ranging from queuing to inventory were developed. They had
such names as Xcell, SLAM, SIMAN, Witness, and MAP/1.
Introduction:
 To simulate is to try to duplicate the features, appearance,
and characteristics of a real system.
 The idea behind simulation is to imitate a real-world
situation mathematically, then to study its properties and
operating characteristics, and, finally, to draw conclusions
and make action decisions based on the results of the
simulation.
What is Simulation?

 Simulation
A quantitative analysis technique that involves
building a mathematical model that represents
a real-world situation. The model is then
experimented with to estimate the effects of
various actions and decisions.
Using Simulation, a manager should:
(1) define a problem,
(2) introduce the variables associated with the
problem,
(3) construct a simulation model,
(4) set up possible courses of action for testing,
(5) run the simulation experiment,
(6) consider the results (possibly deciding to modify
the model or change data inputs), and
(7) decide what course of action to take.
Process of Simulation
Advantages of Simulation
 It is relatively straightforward and flexible. It can be used to
compare many different scenarios side-by-side.
 Recent advances in software make some simulation models
very easy to develop.
 It can be used to analyze large and complex real-world
situations that cannot be solved by conventional quantitative
analysis models. For example, it may not be possible to
build and solve a mathematical model of a city government
system that incorporates important economic, social,
environmental, and political factors. Simulation has been
used successfully to model urban systems, hospitals,
educational systems, national and state economies, and even
world food systems.
 Simulation allows what-if? types of questions. Managers like
to know in advance what options are attractive. With a
computer, a manager can try out several policy decisions
within a matter of minutes
 Simulations do not interfere with the real-world system. It
may be too disruptive, for example, to experiment with new
policies or ideas in a hospital, school, or manufacturing
plant. With simulation, experiments are done with the
model, not on the system itself.
 Simulation allows us to study the interactive effect of
individual components or variables to determine which ones
are important
 “Time compression” is possible with simulation. The effect of
ordering, advertising, or other policies over many months or
years can be obtained by computer simulation in a short
time.
 Simulation allows for the inclusion of real-world
complications that most quantitative analysis models cannot
permit. For example, some queuing models require
exponential or Poisson distributions; some inventory and
network models require normality. But simulation can use any
probability distribution that the user defines; it does not
require any particular distribution.
Disadvantages:
 Good simulation models for complex situations can be
very expensive. It is often a long, complicated process to
develop a model. A corporate planning model, for
example, may take months or even years to develop.
 Simulation does not generate optimal solutions to
problems as do other quantitative analysis techniques such
as economic order quantity, linear programming, or PERT.
It is a trial-and-error approach that can produce different
solutions in repeated runs.
 Managers must generate all of the conditions
and constraints for solutions that they want to
examine. The simulation model does not
produce answers by itself
 Each simulation model is unique. Its solutions and
inferences are not usually transferable to other
problems
Terms
 Systems Simulation: Simulation models that deal with the
dynamics of large organizational or governmental systems.
 Random Number Interval: A range of random numbers
assigned to represent a possible simulation outcome.
 Validation: The process of comparing a model to the real
system that it represents to make sure that it is accurate.
 Random Number. A number whose digits are selected
completely at random
 Operational Gaming: The use of simulation in competitive
situations such as military games and business or
management games
Formula:

Expected time
= probability of occurrence (i) x event (i)
Monte Carlo Simulation
 Simulations that experiment with probabilistic
elements of a system by generating random
numbers to create values for those element
Applications of Monte Carlo
A few examples of these variables follow:
1. Inventory demand on a daily or weekly basis
2. Lead time for inventory orders to arrive
3. Times between machine breakdowns
4. Times between arrivals at a service facility
5. Service times
6. Times to complete project activities
7. Number of employees absent from work each day
Steps in Monte Carlo Simulation
1. Establishing probability distributions for important
input variables
2. Building a cumulative probability distribution for
each variable in step 1
3. Establishing an interval of random numbers for
each variable
4. Generating random numbers
5. Simulating a series of trials
 Example 1.0
 Harry’s Auto Tire sells all types of tires, but a popular radial tire accounts for
a large portion of Harry’s overall sales. Recognizing that inventory costs can
be quite significant with this product, Harry wishes to determine a policy for
managing this inventory. To see what the demand would look like over a
period of time, he wishes to simulate the daily demand for a number of days.
Using the following random numbers...
Example: 2.0
 Higgins Plumbing and Heating maintains a stock of 30-gallon hot water
heaters that it sells to homeowners and installs for them. Owner Jerry
Higgins likes the idea of having a large supply on hand to meet customer
demand, but he also recognizes that it is expensive to do so. He examines
hot water heater sales over the past 50 weeks and notes the following:
a. If Higgins maintains a constant supply of 8 hot water
heaters in any given week, how many times will he be out of
stock during a 20-week simulation? We use random numbers
from the seventh column of Table 14.4, beginning with the
random digits 10.
b. What is the average number of sales per week (including
stock outs) over the 20-week period?
c. Using an analytic non-simulation technique, what is the
expected number of sales per week? How does this
compare with the answer in part (b)?