MS926

Business Simulation Methods

Academic Year 2022-23

Credit value: 10
- Standard/level: 5
- Core/optional: Optional
- Semester: 2
- Pre-requisites: None

Lecturers:

Dr Fahim Ahmed: fahim.ahmed@strath.ac.uk

Le Nguyen: nguyen-le-khanh-ngan@strath.ac.uk

1. Rationale

This class is offered as an elective to a number of MSc courses. Each of the MSc courses
introduces students to modelling techniques that can be used to help support decision-makers.
Business simulations are one such important modelling technique. This class focuses on two
specific business simulation techniques; discrete-event simulation and system dynamics.

Discrete-event simulation provides a decision maker/client with the equivalent of a flight

simulator of their factory or service operation. This is done by modelling every significant
resource and event in the operation and displaying them on a computer screen as icons which
move/work with simulated time. This enables the decision maker/client to try out different ways of
operating the system without experimenting with the real system.

System dynamics has been around for over 50 years. It was originally created to help decision-
makers to design improved management policies and organizational structures. System
dynamics is increasingly used in organizations all around the world and has been applied to a
wide variety of issues including organizational change, climate change, healthcare and project
management.

2. Class Description

The course will focus on the main two forms of business simulation; discrete-event simulation
and system dynamics (a continuous simulation technique). For discrete event simulation (DES)
the class will start with an introduction to DES aiming to familiarise students with the concept and
its use as well as specific features of a typical DES tool. The class continues with discussing a
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rational approach to simulation using a number of examples from manufacturing and service
operations. The link between simulation and performance measurement is discussed at this part.

This is followed by a detailed discussion on the use of probabilistic distributions in simulation

where the emphasis is on ‘relevance for use’ rather than the underlined statistical theories and
techniques. The issues of certainty of output and validation of the model are discussed in the
next stage where students understand the importance of trials in simulation. While the main
emphasis is on DES in general, a number of basic and advanced techniques of Simul8 (a
popular DES software) are explained and demonstrated for students. The discussion on DES
concludes with addressing some practical issues with regard to doing a DES project for a
business client.

For system dynamics the class will provide a background to system dynamics including its links
to other modelling techniques being taught on the course. In particular, its links to problem
structuring methods. A complete approach to system dynamics modelling is then covered in
detail. The behaviour of various systems, in particular complex business problems, are examined
through the construction of causal loop diagrams. The class then goes on to introduce computer
software used specifically for system dynamics modelling. After familiarisation with the package,
students will be expected to use it to model and investigate a variety of systems. In particular, the
class will explore how such models can be used to investigate complex business problems and
how they can be used to decide upon managerial actions that should be taken to help alleviate
the problems.

3. Class Aims

To introduce students to two simulation methods widely used in business. The first, discrete-
event simulation, is a visual interactive tool that facilitates decision making in an operating
system. The objective is to make students competent in applying DES in any operation system
and specifically to enable them to use a popular DES software (Simu8) for this purpose. The
second, a form of continuous simulation, is system dynamics. This technique is used to help
provide understanding about complex systems through the construction of qualitative diagrams
and quantitative simulation models.

4. Learning Outcomes

a. Subject-specific knowledge

• To understand the main uses of business simulations and when to use the two different
types; discrete event simulation and system dynamics

• To understand specific features of discrete event simulation

• To be able to approach a DES project in a rational way, using performance measures

• To be able to investigate certainty of output and validation of a DES model

• To understand how to use features like trials and warm up period to make the model and its
outcome more reliable

• To be able to work with Simul8 software and some of its advanced tools

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• To understand and appreciate practical issues involved with a typical DES project.

• To be able to determine the type of systems whose behaviour can be investigated using
system dynamics

• To develop an understanding of the elements involved in the basic construction of a causal

loop diagram;

• To appreciate how a verbal description of a system can be translated into a causal loop
diagram and used to examine the system’s behaviour;

• To appreciate how a causal loop diagram, representing a given system, can be translated
into a quantitative system dynamics model;

• To develop an understanding of the procedures used to validate a system dynamics model;

• To appreciate the process by which system dynamics models can be used to investigate
systems behaviours so that practical recommendations can be made to help improve the
system;

b. Cognitive abilities and non-subject-specific skills

• The learning activities are designed within the class to develop the students within the
following areas:

• Problem structuring skills

• Written Communication skills

• Presenting and reporting skills

• Express problems in forms conducive for the software support available

5. Indicative Structure

• Introduction to business simulation – what it is and how it can be used.

• Introduction to both forms of simulation that will be explored during the class
• Introduction to DES and its features and use in business operations
• Modelling uncertainty in DES
• Verification and Validation of model
• Validation and certainty of output
• Advanced Simul8 techniques
• Practical issues of a typical DES project
• Background to system dynamics and how it has been used in the past.
• Construction and use of qualitative causal loop diagrams
• Introduction to computer software used for quantitative system dynamics modelling.
• Construction of quantitative system dynamics models
• Validation of system dynamics models
• Investigating how system dynamics models can be used to analyse the effect of
changes within systems.
• Compare and contrast the two forms of simulation

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6. Teaching and Learning Methods

For system dynamics, the course time is split between lectures and computer labs. Lectures are
used to introduce new areas to the students and to discuss the theory of the system dynamics
process. The computer labs are used to enable students to develop the skills required to be use
appropriate computer software to construct system dynamics models.

All DES classes take place in the computer labs to provide hands-on experience for students.

7. Reading List

The recommended text for the system dynamics element is:

Sterman J (2000) Business Dynamics: Systems Thinking and Modeling for a Complex World,
McGraw-Hill
Various books can also be used for background reading:
Morecroft J (2007) Strategic Modelling and Business Dynamics, Wiley, Chichester.
EF Wolstenholme (1990)A System Enquiry A System Dynamics Approach, Wiley.
N Roberts et al.1983) Introduction to Computer Simulation A System Dynamics Modeling
Approach, Addison-Wesley.
G Richardson & A Pugh (1981) Introduction to System Dynamics Modeling with Dynamo, MIT
Press: Cambridge, Mass.
J Forrester (1961) Industrial Dynamics, MIT Press: Cambridge, Mass.

Helfpful books for DES part is :

• S. Robinson (2014) Simulation: The Practice of Model Development and Use (Second
and/or First Edition
• J. Banks, et al., (2010) Discrete Event Simulation, Pearson.London.
• Robinson, et al., (2010) Conceptual Modelling for Discrete Event Simulation . CRC Press,
London.
• M. Pidd (2004) Computer Simulation for Management Science, 5th edition, Wiley.

8. Resources
Myplace videos and demos for various topics and lab exercises.
External resources and tutorials as identified from time to time.
Copy of the recommended textbooks are available in the short loan of the library.

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9. Assessment Including Reassessment

The split between SD and DES part will be as follows:

50 % - SD assignment (individual)

30% - Project on DES part (Group)

20% - Report on video learning series DES (individual)

There will be an assignment for system dynamics that will test both the theory of the subject as
well as getting students to model and investigate a system dynamics model and make
appropriate changes to it. Reassessment will involve retaking the assignment. There will be a
group assignment on DES where students need to apply the technique to a business problem.
The assignment attempts to provide a practical opportunity for students by asking them to model
a real system. There will be peer-scoring and feedback system in place for recording the
individual contribution in the group work. In addition, there will be a requirement of a report
submission on Video Learning Series (VLS) that forms an important part of the DES learning
content.

The weighting for the module will be 50% for the exam on SD and 50% for DES part split among
group project, and brief report on Video Learning Series. Re-assessment for DES part will be
based on individual assignment.

10. Matrix of Learning Outcomes/Assessment

subject specific knowledge and skills teaching/ learning evidence of

method outcome
To understand the main uses of business simulations and when to use l, dr e, ep
the two different types; discrete event simulation and system dynamics
To understand specific features of discrete event simulation l, dr ep
To be able to approach a DES project in a rational way, using l, dr ep
performance measures
To be able to investigate certainty of output and validation of a DES I, dr, c ep
model
To understand how to use features like trials and warm up period to make I, dr, c ep
the model and its outcome more reliable
To be able to work with Simul8 software and some of its advanced tools I, dr, c ep
To understand and appreciate practical issues involved with a typical DES I, dr ep
project
To be able to determine the type of systems whose behaviour can be l, dr e
investigated using system dynamics
To develop an understanding of the elements involved in the basic l, dr e
construction of a causal loop diagram;
To appreciate how a verbal description of a system can be translated into l, dr, cd, c e
a causal loop diagram and used to examine the system’s behaviour;
To appreciate how a causal loop diagram, representing a given system, l, dr e
can be translated into a quantitative system dynamics model;

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 To develop an understanding of the procedures used to validate a system l, dr, cd e
dynamics model;
To appreciate the process by which system dynamics models can be l, dr e
used to investigate systems behaviours so that practical
recommendations can be made to help improve the system;

cognitive abilities and non-subject specific skills

Problem structuring skills l, dr e, ep

Written communication skills ep
Presenting and reporting skills l, dr, cd ep
An ability to express problems in forms conducive for the software support c e, ep
available

l – lecture, c – computer lab session, dr – directed reading, ir – independent reading, rp- research
papers, ep – empirical project, gp- group presentation, e – exam, cd – class discussion.

11. Indicative Hours

• Lectures 10
• Computer Labs 20
• Class test 0
• Lecturer led revision sessions 0
• Assignment 20
• General reading 20
• Individual revision 30
• Tutorial preparation 0

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