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Learning Objectives  Explain what is meant by the term simulation  List some of the reasons for simulation’s popularity as a tool for decision making  Explain how and why random numbers are used are used in simulation  Outline the advantages and limitations of simulation  Describe the alternatives that a manager would reject before choosing simulation as a decision making tool  Solve typical problems that require simulation 18S-2 .

Simulation Simulation: a descriptive technique that enables a decision maker to evaluate the behavior of a model under various conditions. Simulation models complex situations Models are simple to use and understand Models can play “what if” experiments Extensive software packages available 18S-3 .

Repeat 4 and 5 until results are satisfactory 18S-4 . Develop the simulation model 3. Test the model 4. Run the simulation and evaluate results 6. Identify the problem 2. Develop the experiments 5.Simulation Process 1.

Monte Carlo Simulation Monte Carlo method: Probabilistic simulation technique used when a process has a random component  Identify a probability distribution  Setup intervals of random numbers to match probability distribution  Obtain the random numbers  Interpret the results 18S-5 .

Example S-1 18S-6 .

Example S-1 18S-7 .

Simulating Distributions  Poisson  Mean of distribution is required Need to know the mean and standard deviation  Normal  Simulated = Mean value + Random X Standard number deviation 18S-8 .

1 F(x) 0 a b x Simulated a + (b .Uniform Distribution Figure 18S.a)(Random number as a percentage) = value 18S-9 .

2 F(t) P ( t  T ) . RN 0 T t 18S-10 .Negative Exponential Distribution Figure 18S.

Computer Simulation  Simulation languages  SIMSCRIPT II.5  GPSS/H  GPSS/PC  RESQ 18S-11 .

Advantages of Simulation  Solves problems that are difficult or impossible to solve mathematically  Allows experimentation without risk to actual system  Compresses time to show long-term effects  Serves as training tool for decision makers 18S-12 .

Limitations of Simulation  Does not produce optimum solution  Model development may be difficult  Computer run time may be substantial  Monte Carlo simulation only applicable to random systems 18S-13 .

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