Velammal Engineering College

(An Autonomous Institution, Affiliated to Anna University – Chennai)

Velammal Newgen Park Ambattur – RedHills Road , Chennai-600 066

QUESTION BANK CONTINUOUS INTERNAL EVALUATION – II

Code 21 CEB 07 T
Subject Title Computer Applications in Construction Engineering and Planning
Department CIVIL ENGINEERING
Year / Sem 3rd Year 5th Semester Sem ODD
Batch 2021- 25 AY 2023 – 24
Programme BE Civil Engg. Honours with Specialization Vertical Construction Management
Answer ALL Questions
PART-A ( MCQ ) ( 6x1 = 6 marks)
# Question CO Blooms
3A In Inventory Management, JIT refers to CO 3 C2
A Japanese Indigenous Technology B Japanese Industrial Technique
C Just in Time D Just In-case To

3B The other name for Carrying Cost is CO 3 C2

A Ordering Cost B Holding Cost C Unit Cost D Stock – out Cost

3C The time duration from the moment a new order for fresh supplies is placed and CO 3 C2
upto the moment, the supplies reach the factory / site is called as
A Holding Time B Waiting Time C Lead Time D Down Time

3D Carrying Cost is calculated for CO 3 C2

A Average of the EOQ B Whole of the EOQ
C Whole of the Annual Requirement Quantity D Half of the Annual Requirement

3E The next order for new stocks is placed when the Quantity of Existing Stock reaches CO 3 C2
A Reorder Level B EOQ Level C Annual Requirement Level D Zero Stock

3F EOQ model of Inventory Management is a model of CO 3 C2

A Deterministic Model B Probabalistic Model C Determinist / Probabalistic D None of these

3G In EOQ model, the rate of Stock Reduction is CO 3 C2

A Linear B Non-linear C Uniform D Non-uniform

********************************************
5A Which of the following statements are NOT true of simulation? CO 3 C2
A Simulation model cannot prescribe what should be done about a problem
B Simulation models can be used to study alternative solutions to a problem
C Simulation models the behaviour of a system
D The equations describing the operating characteristics of the system are know

Which of the following statements

are NOT true of simulation?
 A. Simulation model cannot
prescribe what should be done about
a problem
B. Simulation models can
be used to study alternative
solutions to a problem
C. Simulation models the
behaviour of a system
D. The equations describing
the operating characteristics of the
system are know
Which of the following statements
are NOT true of simulation?

A. Simulation model cannot

prescribe what should be done about
a problem
B. Simulation models can
be used to study alternative
solutions to a problem
 C. Simulation models the
behaviour of a system
D. The equations describing
the operating characteristics of the
system are know
5B Monte Carlo simulation gets its name from which of the following? CO 5 C2
A Data collection B Model formulation C Random-number assignment D Analysis

5C Which of the following statistical methods are commonly used to analyze simulation results? CO 3 C2
A Regression analysis B t-tests C Analysis of variance D All of the above

5D Comparing situations / conditions Analytically / Virtually using computer models is CO 5 C2

A Stimulation B Simulation C Stagnation D Standardization
5E Simulation should be thought of as a technique for CO 3 C2
A Increasing one's understanding of a problem
B Obtaining a relatively inexpensive solution to a problem
C Obtaining an optimal solution to a problem
D Providing quick and dirty answers to complex problems

5F ERP in construction helps to CO 5 C2

A Integrate all functions B Communicate between all stakeholders
C Ensure seamless communication D All of the above

5G An enterprise is a group of people with ______ CO 3 C2

A common goal B separate goal for each C multiple goals D Different
Diversified Goals
department. all converging

PART-B ( 8 Questions * 2 marks each = 16 marks)

3A Name the different components / classifications of Inventory (2) CO 3 C1
3B What are the two major classifications of Inventory Management Modelling? (2) CO 3 C2
3C What is meant by EOQ? (2) CO 3 C2
3D List out the various Probabilistic Inventory Models (2) CO 3 C2
3E Enumerate the various types of Costs associated with Inventory Management (2) CO 3 C2
3F Define shortage cost in inventory. (2) CO 3 C2
3G Define Lead Time (2) CO 3 C2
3H Write two characteristics considered in the models of Inventory Management (2) CO 3 C2
3I What are the issues arising due to excess inventory? (2) CO 3 C2
3J What are the drawbacks of deterministic inventory models ? (2) CO 3 C2

5A What is meant by Simulation? (2) CO 5 C2

5B What is Monte Carlo Simulation? (2) CO 5 C2
5C State the two models of Simulation. (2) CO 5 C2
5D What is the purpose of using Random Numbers in Simulation? (2) CO 5 C2
5E What are Pseudo – Random Numbers? Are they not random in nature? (2) CO 5 C2
5F Define Sequencing and the methods of determine the optimum sequencing. (2) CO 5 C2
5G What are the limitations of Gantt Chart in solving larger problems in Sequencing? (2) CO 5 C2
5H What are the advantages of ERP System? (2) CO 5 C2
5I List out some of the latest Enterprise softwares used. (2) CO 5 C2
5J What are the services provided by Enterprise Softwares? (2) CO 5 C2

PART-C ( 2 Questions * 14 marks each = 28 marks)

How does stock vary with time in a typical inventory system? Draw a diagram and
3 CO 3 C2
explain the parameters involved
3 Describe the Deterministic Inventory Model in detail. CO 3 C2
A company has a carrying cost at 12%. ordering cost at Rs 900 per order. The
estimated annual requirement is 58,000 units at a price of Rs 400 per unit.
3 ( a ) What is the most economical number of units to order? CO 3 C2
( b ) How many orders should be placed in a year?
( c ) How often should an order be placed?
John Equipment Company estimates its carrying cost at 15% and its ordering cost at $9
per order. The estimated annual requirement is 48,000 units at a price of $4 per unit.
3  What is the most economical number of units to order? CO 3 C2
 How many orders should be placed in a year?
 How often should an order be placed?
To date, Raymond Bro. has been purchasing an item in lots of 900 units. This equates to
a three-month supply. The cost per unit is $12, the order cost is $16 per order, and the
3 carrying cost is 25%. CO 3 C2
Required: How much can Raymond Bro. save per year by purchasing the item in the
most economical quantities?
A manufacturing company places a semi-annual order of 24,000 units at a price of $20
per unit. Its carrying cost is 15% and the order cost is $12 per order.
3 CO 3 C2
What is the most economical order quantity?
How many orders need to be placed?
3 Discuss the role of Inventory in the organisation of strategic management. CO 3 C2
3 Explain the factors related to decision making in inventories CO 3 C2
3 Compare Deterministic and Probabilistic Inventory Models? CO 3 C2
How does stock vary with time in a typical inventory system? Draw a diagram and
3 CO 3 C2
explain the parameters involved.

5 Describe ERP in detail CO 5 C2

5 How would simulation be useful in the appraisal of projects ? Discuss CO 5 C2
5 Explain about the Resequencing process for accelerating the schedules. CO 5 C2
5 Explain the issues related to the master data management with respect to Enterprises CO 5 C2
What are ERP Systems? Discuss in detail the applications of any commonly used
5 CO 5 C2
software package for ERP.
 ANSWERS PART-B ( 8 Questions * 2 marks each = 16 marks)
3A Name the different components / classifications of Inventory (2) CO 3 C1
Four types of inventory
 raw materials,
 work-in-progress (WIP),
 finished goods, and
 maintenance, repair, and overhaul (MRO) inventory

Another classification of Inventories is

3 B State the major classifications of Inventory Management Modelling (2) CO 3 C2

Two major classifications of Inventory Management Modelling
 Deterministic Inventory Modeling
 Probablistic Inventory Modeling

Another classification is
 Fixed Order Quantity Inventory System
 Periodic Review Inventory System
3 C What is meant by EOQ? (2) CO 3 C2
3 D List out the various Probabilistic Inventory Models (2) CO 3 C2
3 E Enumerate the Costs associated with Inventory Management (2) CO 3 C2

3 F Define shortage cost in inventory. (2) CO 3 C2

Shortage Cost in Inventory also called as STOCK –OUT Cost

• The first step is to understand the cost of a stock-out. There are direct and indirect costs associated
with a stock-out. Direct costs include the cost of the item that is out of stock, the cost of shipping the
replacement item, and the cost of lost sales. Indirect costs include the cost of lost productivity and the
cost of lost customer goodwill.

(
CO C
3G Define Lead Time 2
3 2
)
 In general, lead time in
inventory management is
the amount of time between
when a purchase order is
placed to replenish products
and when the order is
received in the warehouse.

3 H Write two characteristics considered in the models of Inventory Management (2) CO 3 C2

Factors Affecting Inventory Cost
• Production Volume
• Lead Time
• Order Quantity
• Carrying Cost
• Obsolescence Cost
• Market Demand
• Prices of Raw Materials

Other Characteristics are

 Deterministic nature or probablistic nature of the Demand
 Deterministic nature or probablistic nature of the Supplies
 Delays or Interrupptions

3I What are the issues arising due to excess inventory? (2) CO 3 C2

Excess inventory can lead to poor quality goods and degradation. If you've got high levels of
excess stock, the chances are you have low inventory turnover, which means you're not turning
all your stock on a regular basis. Unfortunately, excess stock that sits on warehouse shelves can
begin to deteriorate and perish.

3J What are the drawbacks of deterministic inventory models ? (2) CO 3 C2

Deterministic Models - the Pros and Cons

Most financial planners will be accustomed to using some form of cash flow modelling tool powered by a
deterministic model to project future investment returns. Typically, this is due to their simplicity.
Often, a single estimate for an investment return, such as 2%, 5% or 8%, is used to predict the future value
of a fund or portfolio. This is the basis of deterministic forecasts, which produce a specific result for a
specific input - every single time.
Deterministic models are typically used by product providers to illustrate statutory future projections of
long-term investments (such as pensions). If the same projection rates are used, these forecasts can then be
used to compare different providers, particularly around charges.
However, deterministic models do not make any allowance for the fact that markets are complex, irregular
and ever-changing. As such, any model that is based on long-term average returns can be easily upset by
the unexpected implications of sequencing risk, which can have a huge impact on a retiree’s income and
lifestyle in retirement.

Pros

 Deterministic models have the benefit of simplicity. They rely on single assumptions about long-term
average returns and inflation.
 Deterministic is easier to understand and hence may be more appropriate for some customers.

Cons

 Cash flow modelling tools that use deterministic or over-simplistic stochastic projections are fundamentally
flawed when making financial planning decisions because they are unable to consider ongoing variables
that will affect the plan over time.
 Deterministic tools tend to overestimate the level of sustainable income (on a like for like basis) because
they are unable to take into account market volatility, which causes ‘pound cost ravaging' and sequencing
risk, both of which have a significant negative effect on sustainable income.
 The choice of future increase assumption is critical and puts the responsibility of the final outcome on the
provider of the tool

All of which renders deterministic models inadequate and potentially misleading.

5 A What is meant by Simulation? (2) CO 5 C2

Simulation is
A simulation is a model that mimics the operation of an existing or proposed system, providing
evidence for decision-making by being able to test different scenarios or process changes. This
can be coupled with virtual reality technologies for a more immersive experience.

Simulations can be used to tune up performance, optimise a process, improve safety, testing
theories, training staff and even for entertainment in video games! Scientifically modelling systems
allows a user to gain an insight into the effects of different conditions and courses of action.

Simulation can also be used when the real system is inaccessible or too dangerous to assess or
when a system is still in the design or theory stages.
 Key to any simulation is the information that is used to build the simulation model and protocols for
the verification and validation of models are still being researched and refined, particularly with
regard to computer simulation.

Advantages
1. Less Financial Risk 2. Exact Repeated Testing
3. Examine Long-Term Impacts 4. Gain Insights for Process Improvement
5. Assess Random Events 6. Test Non-Standard Distributions
7. Encourages In-Depth Thinking 8. Improve Stakeholder Buy-In

Limitations / Disadvantages
While there are a great many advantages to using simulation, there are still some limitations when
compared to other similar techniques and technologies, such as digital twin.
A digital twin expands on simulation to incorporate real time feedback and a flow of information
between the virtual simulation and a real life asset or assets. The difference being that while a
simulation is theoretical, a digital twin is actual.
Due to this, simulations have limitations when it comes to assessing actual real-world situations as
they occur.

Types of Simulation
Simulation can be broken down into three overarching types, as follows:
1. Discrete Event Simulation
2. Dynamic Simulation
3. Process Simulation

Examples
City and Urban Planning
Simulation used to design new cities, urban environments to test how existing urban areas can
evolve as a result of policy decisions. This includes city infrastructure and traffic flow among other
potential models.
Disaster Preparation
Simulations can replicate emergency situations, to help with disaster preparedness, including
training and designing responses to natural disasters, pandemics or terrorist attacks.
Engineering Systems
Simulation is widely used for engineering systems to imitate operations and functions of
equipment, processes and procedures. Engineering simulations can combine mathematical
models and computer-assisted simulation for design or improvement of existing processes.
Project Management
Simulation can be used for project management analysis and training purposes. Whether training
managers or analysing the outcomes of different decisions, simulation is frequently conducted with
software tools.

5 B What is Monte Carlo Simulation? (2) CO 5 C2

The Monte Carlo simulation is a mathematical technique that predicts
possible outcomes of an uncertain event. Computer programs use this
method to analyze past data and predict a range of future outcomes
based on a choice of action.

5 C State the two models of Simulation. (2) CO 5 C2

Types of Simulation Models:
Discrete Models – Changes to the system occur at specific times.
Continuous Models – The state of the system changes continuously over time.
 Mixed Models – Contains both discrete and continuous elements.

Another set of classification of Simulation

1. Monte Carlo / Risk Analysis Simulation

2. Agent-Based Modeling & Simulation
3. Discrete Event Simulation
4. System Dynamics Simulation Solutions

5 D What is the purpose of using Random Numbers in Simulation? (2) CO 5 C2

Use of Random numbers in Simulation
 Random numbers can be given as input to some simulation model to test that
model. By giving random numbers to model we can find out at which input our
simulation model fails to calculate proper result in short it can be used for testing
the simulation model.
 Random numbers are used to model timings and behaviour of event.
 Random numbers are important constituent of mathematical modelling.
 Random numbers are also used in simulation of discrete system.

5 E What are Pseudo – Random Numbers? Are they not random in nature? ( 2 ) CO 5 C 2
A pseudorandom sequence of numbers is one that appears to be statistically random, despite having
been produced by a completely deterministic and repeatable process.[1] Simply put, the problem is that
many of the sources of randomness available to humans (such as rolling dice) rely on physical
processes not readily available to computer programs.

Define Sequencing and the methods of determine the optimum ( 2 ) CO 5 C 2

5F
sequencing.
Sequencing is the order of tasks to be done in chain. Hence the
next task is started once the previous one is completed.

Priority Sequencing Rules

• First-come, first-served (FCFS)

• Earliest due date (EDD)
• Critical ratio (CR)
CR = [(Due date) – (Today’s date)]/Total shop time remaining
  A ratio of less than 1.0 implies that the job is behind schedule
 A ratio greater than 1.0 implies the job is ahead of schedule
 The job with the lowest CR is scheduled next

• Shortest processing time (SPT)

• Slack per remaining operations (S/RO)

 The job with the lowest S/RO is scheduled next

S/RO = [(Due date –Today’s date)–Total shop time remaining] /
Number of operations remaining

What are the limitations of Gantt Chart in solving larger

5G (2) CO 5 C2
problems in Sequencing?
Gantt charts get into a lot of trouble if…

 The various items in the chart change a lot

 The order of things can easily change
 The dependencies between items change a lot, or are hard to define.
 The content of things can easily change, and thus change the dependencies and
order
 The estimates for the effort/duration are hard to determine, or contain a lot of
uncertainties

5 H What are the advantages of ERP System? (2) CO 5 C2

Benefits Of ERP
What are the key business benefits of ERP software?

1. Enhanced Business Reporting:

 Better reporting tools with real-time information
 A single source of truth – one integrated database for all business processes
2. Better customer service:
 Better access to customer information
 Faster response times
Improved on-time delivery
 Improved order accuracy
3. Improved Inventory Costs:
 Only carry as much inventory as needed, avoid these common issues
 Too much inventory, and higher overhead costs
 Too little inventory, and longer customer fulfillment times
4. Boosted Cash Flow:
 Better invoicing and better collections tools to bring cash in faster
 Faster cash means more cash on-hand for the business
5. Cost Savings:
 Improved inventory planning
 Better procurement management
 Better customer service
 Improved vendor relationship management
6. Better Data & Cloud Security:
 Dedicated security resources
 Avoid installing malicious software
 Data distributed across multiple servers
7. Business Process Improvements:
 Automate manual or routine tasks
 Implement smarter workflows
 Gain efficiency
8. Supply Chain Management:

 Effective demand forecasting and lean inventory
 Reduce production bottlenecks
 Transparency through the business

Cons of ERP – Important Factors &

Disadvantages
1. Costs of an ERP Software
 Third-party software add-ins
 Implementation costs
 Maintenance
 Initial and continuous training
2. Complex Data Conversion
 Developing a solid data conversion strategy can be difficult
 You have to define, examine and analyze data sources
 Bad data conversion will cause delays and increased costs
3. Requires thorough training
 Training needs to cover all of the ERP system’s features.
 ERP training sessions need to be in line with business processes
 IT users need to be trained for the technical aspects of the ERP System
5I List out some of the latest Enterprise softwares used. ( 2 ) CO 5 C2

What is the best ERP for construction companies?

The best construction ERP will meet your specific ERP feature requirements,
but some systems we've included in our top construction ERP roundup include:

Viewpoint
Solidblox
Foundation
Jonas ERP
Acumatica
Sage
Epicor
Microsoft Dynamics
Penta
Maestro

There are many more systems you can discover using our comparison tools,
and you can filter these based on your needs, as explained above.

Viewpoint
Viewpoint is from Trimble and provides a construction accounting system that is
at the heart of their ERP. ViewpointOne, hosted in the cloud, combines the
industry’s best construction enterprise resource planning (ERP) offerings with
project management and field products. Viewpoint has modules aimed
specifically at a variety of construction businesses such as general heavy,
highway, civil, engineering, mechanical, electrical, HVAC, and plumbing.

All of the software can integrate with Trimble instruments including laser and
optical measurement and GPS systems.

Solidblox
Solidblox is ERP software designed to set a construction business on solid
footing. If your business is a real estate developer, infrastructure developer, or
general contractor, this could be the system you need.

Integra is their ERP foundation. ProjectMan is for the management and costing
of construction projects. RealtyMax is the CRM component of their system.
Resourcer helps manage labor, subcontractors, inventory, and equipment.
Costless is the name of the financial management and human resources
modules. And Mallwox provides tools to help optimize the return from shopping
malls.

Foundation
Foundation Software claims to be America’s number 1 construction account
system. They offer a variety of modules that link to create a complete ERP. The
majority of their users have 15 to 250 employees in the field and between $3
and $50 million in revenue each year. Many wanted to upgrade from
QuickBooks or other small business accounting products. Components include
job costing, payroll, scheduling, project management, equipment tracking, and
time & material.
Use our free construction ERP comparison tool to find the best
 software for your business needs
Jonas ERP
Jonas construction - ERP is a comprehensive and fully integrated construction
accounting and service work order solution used by over 1,000 clients across a
number of construction markets. Jonas Enterprise serves mechanical, HVAC,
electrical, plumbing, general, excavating, and heavy highway businesses. Jonas
Premier is for general contractors, design-builders, home builders, and land
developers. Jonas is best suited for companies in the revenue range of $5
Million to $100 Million.
Acumatica
Acumatica is a major provider of ERP systems for a variety of businesses
including construction. Their products are a modern construction ERP for
residential and commercial construction management. The system has the
latest project reports, contracts, budgets, plans, specifications, change orders,
invoices, purchase orders, and job costs.

It will keep staff and subcontractors informed and communicating—on phones,

tablets, and PCs. You get accurate information by making the financial system
your single source.

Sage
Timberline is one of the oldest construction ERP systems. I first saw this system
around 1980 and today it is part of the Sage family. Timberline is now Sage 300.
Sage 300’s target is real estate and construction businesses. This ERP includes
cost estimating, project management, finance and accounting, document
management, and service management.

Sage 100 is another ERP from the same provider. This one is targeted more at
contractors. Estimate the job, submit your bid, receive the contract, and manage
the project including costs and cash flow to completion.

Epicor
Epicor is an ERP set of products with optional modules that will fit construction
companies and many other types of business. Epicor works as an on-premises
system and in the cloud as a SaaS ERP. Epicor can include ERP, project
management, customer relationship management, quality management, and
estimating. Epicor is quite flexible and is easily set up for your unique business.
Dynamics
Microsoft Dynamics SL is part of the extensive Dynamics family of ERP systems
from Microsoft. SL is aimed at project-based businesses. Dynamics SL is used
worldwide and estimating and project costing are recognized as strengths.
Optional modules allow a business to tailor the system to its needs. As a plus,
this ERP uses the power of the entire office suite to extend its value.
Penta
Penta is construction ERP software that has been around 35 years. While
Penta’s reputation is considered a system for subcontractors, Penta can be
used by many businesses in the construction industry. Penta includes
construction accounting and payroll. Project management and engineering
management are included. Penta will help a business manage equipment and
 inspections too.
Maestro
Maestro is a construction ERP system out of Canada. General contractors,
home builders, concrete producers, trade contractors, and drilling and mining
are target customer businesses. Maestro starts with accounting and project
management. A business then selects from a list of core modules such as
billing, payroll, procurement, and estimating. Then there are more than twenty
modules to choose from that you can use to tailor the product to the specific
needs of any construction business.

5J What are the services provided by Enterprise Softwares? (2) CO 5 C2

What is enterprise software?

Enterprise software, or enterprise application software, is computer software used
by organizations rather than individual users. Common types of enterprise software
include contact centre software, business intelligence, enterprise
communication, inventory management, marketing tools, online payments, and
enterprise resource planning. Organizations use enterprise software to run, scale,
and optimize their day-to-day operations and processes, as well as build their own
unique applications.

What are the types of enterprise software?

There are several different types and brands of enterprise software available. The
software can be grouped into several broad categories. We give some examples
below.

Enterprise resource planning

Enterprise resource planning (ERP) software helps organizations to manage their

various business processes, including sales, HR, supply chain, project
management, and payroll from within a single centralized system. Organizations
use ERP software to:

Centrally manage organizational data from different sources

Automate tasks and simplify business processes

Deliver operational efficiency and boost profitability

Customer relationship management

Enterprises use customer relationship management (CRM) and contact center

software to:

Better manage customer relationships

Develop insights into customer needs through data

Deliver better experiences to existing customers

Make informed decisions about new prospects

With information about existing and potential clients in one place, businesses can
personalize their communications and build deeper relationships. They can also
bring together data from different departments to build out their sales pipelines
and make financial forecasts.

Business intelligence

Business intelligence is enterprise application software that brings together data

held in multiple sources—the cloud, on-premises data centers, and spreadsheets—
for analysis and reporting. Everyone within an organization gets a consistent view
of the data through interactive dashboards. Business intelligence software also
highlights patterns and trends so that teams can:

Gain valuable insights into business processes

Make strategic decisions with confidence

Avoid time-consuming manual analysis

Supply chain management

Today's supply chains are highly complex global networks of manufacturers,

suppliers, logistics, and retailers that work together to deliver goods and services.
Every organization requires efficient digital infrastructure to co-ordinate and
manage supply chain tasks such as:

Goods tracking

Production updates

Supplier invoicing

Supplier auditing

Effective supply chain management tools, such as Amazon Managed Blockchain

and Amazon Forecast, give organizations complete visibility over their supply
chains to improve forecasting, reduce inventory costs, and improve capacity
utilization.

Human resource management

Enterprise application software for human resource (HR) management is typically

made up of tools to oversee and control HR functions like:

Recruitment and training

Annual leave management

Payroll

Talent retention and engagement

By bringing together all of the functions that a modern enterprise HR department

has to oversee, organizations can work more efficiently and deliver greater value
to the enterprise.
Notes for SIMULATION

Simulation is
A simulation is a model that mimics the operation of an existing or proposed system,
providing evidence for decision-making by being able to test different scenarios or process
changes. This can be coupled with virtual reality technologies for a more immersive
experience.

Simulations can be used to tune up performance, optimise a process, improve safety,

testing theories, training staff and even for entertainment in video games! Scientifically
modelling systems allows a user to gain an insight into the effects of different conditions
and courses of action.

Simulation can also be used when the real system is inaccessible or too dangerous to
assess or when a system is still in the design or theory stages.

Key to any simulation is the information that is used to build the simulation model and
protocols for the verification and validation of models are still being researched and refined,
particularly with regard to computer simulation.

How Simulation Works

Simulation works through the use of intuitive simulation software to create a visual mock-up
of a process. This visual simulation should include details of timings, rules, resources and
constraints, to accurately reflect the real-world process.

Another example would be a manufacturing environment where different parts of the line
can be simulated to assess how their processes interact with those of others. This can
provide an overview of how the entire system will perform in order to devise innovative
methods to improve performance.

Advantages
There are a range of advantages to be gained through the use of simulation, including:

1. Less Financial Risk

Simulation is less expensive than real life experimentation. The potential costs of testing
theories of real world systems can include those associated with changing to an untested
process, hiring staff or even buying new equipment. Simulation allows you to test theories
and avoid costly mistakes in real life.

2. Exact Repeated Testing

A simulation allows you to test different theories and innovations time after time against the
exact same circumstances. This means you can thoroughly test and compare different
ideas without deviation.

3. Examine Long-Term Impacts

A simulation can be created to let you see into the future by accurately modelling the impact
of years of use in just a few seconds. This lets you see both short and long-term impacts so
you can confidently make informed investment decisions now that can provide benefits
years into the future.

4. Gain Insights for Process Improvement

The benefits of simulation are not only realised at the end of a project. Improvements can
be integrated throughout an entire process by testing different theories.

5. Assess Random Events

A simulation can also be used to assess random events such as an unexpected staff
absence or supply chain issues.

6. Test Non-Standard Distributions

A simulation can take account of changing and non-standard distributions, rather than
having to repeat only set parameters. For example, when simulating a supermarket you can
input different types of customer who will move through the shop at different speeds. A
young businesswoman who is picking up a sandwich will move through the shop differently
from an old couple or a mother doing a weekly shop with two children in tow. By taking such
changing parameters into account, a simulation can more accurately mimic the real world.

7. Encourages In-Depth Thinking

Even the process of designing a simulation and determining the different parameters can
offer solutions. By thinking in-depth about a process or procedure it is possible to come up
with solutions or innovations without even using the final simulation.

8. Improve Stakeholder Buy-In

A visual simulation can also help improve buy-in from partners, associates and
stakeholders. You can visually demonstrate the results of any process changes and how
they were achieved, improving engagement with interested parties or even enabling a
simulation based sales pitch.

Limitations
While there are a great many advantages to using simulation, there are still some
limitations when compared to other similar techniques and technologies, such as digital
twin.
A digital twin expands on simulation to incorporate real time feedback and a flow of
information between the virtual simulation and a real life asset or assets. The difference
being that while a simulation is theoretical, a digital twin is actual.

Due to this, simulations have limitations when it comes to assessing actual real-world
situations as they occur.

Why is Simulation Used?

Simulation is used to evaluate the effect of process changes, new procedures and capital
investment in equipment. Engineers can use simulation to assess the performance of an
existing system or predict the performance of a planned system, comparing alternative
solutions and designs.

Simulation is used as an alternative to testing theories and changes in the real world, which
can be costly. Simulation can measure factors including system cycle times, throughput
under different loads, resource utilisation, bottlenecks and choke points, storage needs,
staffing requirements, effectiveness of scheduling and control systems.

What can be Simulated?

Any system or process that has a flow of events can be simulated. As a general rule, if you
can draw a flowchart of the process, you can simulate it. However, simulation is most
effective when applied to processes or equipment that change over time, have variable
factors or random inputs. For example, our supermarket from earlier has variable and
random factors due to customer use times, requirements and stocks.

Using simulation to model complex and changeable dynamic systems can offer insights that
are difficult to gain using other methods.

While simulation can be used to manage processes, procedures and assets, Swedish
philosopher Nick Bostrom took the notion of simulation further in his 2003 paper, ‘Are You
Living in a Computer Simulation?’ He argues that by adding artificial consciousness to
simulations, you can blur the lines between reality and simulation, making it difficult to tell if
you are living in reality or if you are living in a simulation. This simulation hypothesis argues
that, should you become aware that your ‘reality’ was not actually ‘real,’ your memories
could be edited by the simulation to once again make you blissfully unaware that you are
not actually a real person in the real world!

Moving away from the realms of post-human simulation, let’s return to some ‘real world’
types of simulation…

Types of Simulation
Simulation can be broken down into three overarching types, as follows:

1. Discrete Event Simulation

Modelling a system as it progresses through time, for example;

 factory operations (stamping, turning, milling)

 traffic analysis (roads, networks, queues)
2. Dynamic Simulation

Modelling a system as it progresses through space, for example;

 machine kinematics
 human ergonomics
 aerodynamic testing
 virtual prototyping

3. Process Simulation

Modelling physical interactions between two or more systems, for example;

 in-service product modelling

 in-manufacture product modelling
 weather forecasting

Examples
There are many examples of simulation across industry, entertainment, education, and
more. Here are a few notable examples:

Automotive

Simulation allows the characteristics of a real vehicle to be replicated in a virtual

environment, so that the driver feels as if they are sitting in a real car. Different scenarios
can be mimicked so that the driver has a fully immersive experience. These type of
simulators can help train both new and experienced drivers, offering a route to teach driving
skills that can reduce maintenance and fuel costs and ensure the safety of the drivers
themselves.

Biomechanics

Simulation can be applied to biomechanics to create models of human or animal anatomical

structures in order to study their function and design medical treatments and devices.
Biomechanics simulation can also be used to study sports performance, simulate surgical
procedures, and assess joint loads. An additional example is neuromechanical simulation
that unites neural network simulation with biomechanics to test hypotheses in a virtual
environment.

City and Urban Planning

Simulation can be used to design new cities and urban environments as well as to test how
existing urban areas can evolve as a result of policy decisions. This includes city
infrastructure and traffic flow among other potential models.

Digital Lifecycle Design

Simulations can assist with product design, allowing digital prototyping and testing to create
better performing products with a shorter time-to-market, while also assessing the lifecycle
of the finished product.

Disaster Preparation
Simulations can replicate emergency situations, to help with disaster preparedness.This
includes training and designing responses to events such as natural disasters, pandemics
or terrorist attacks. Responses can be tracked and assessed through the simulation,
highlighting potential problems and areas where more training may be required for
responders, as well as ensuring any mistakes are made in a safe environment ahead of any
real life event.

Economics and Finance

Economics, macroeconomics and finance also benefit from simulations. A mathematical

model of the economy can, for example, be tested using historical data as a proxy for the
actual economy. This can be used to assess inflation, unemployment, balance of trade and
budgets.Elsewhere, simulations can replicate the stock exchange or be used to test
financial models. Banks also use simulations to replicate payment and securities settlement
systems.

Engineering Systems

Simulation is widely used for engineering systems to imitate operations and functions of
equipment, processes and procedures. Engineering simulations can combine mathematical
models and computer-assisted simulation for design or improvement of existing processes.

Ergonomics

Simulation can be used to analyse virtual products and working environments incorporating
an anthropometric virtual representation of the human, also known as a mannequin or
Digital Human Model (DHM). These DHMs can mimic the performance and capabilities of
humans in simulated environments. This type of simulation has applications ranging from
assembly lines to disaster management and video gaming to waste collection.

Flight Simulation

Flight simulators have been used for years to train new pilots in a safe environment. This
not only allows pilots to be assessed safely, but can also test instrument failures and other
problems without risking the pilot, the instructor or the aircraft. You can also easily repeat
the exact same scenarios, such as approaching a runway to land, under different
conditions, not to mention saving fuel and other costs compared to actual flying time.

Marine Craft Simulation

Much like flight simulation, it is also possible to simulate working in a ship or submarine.
Simulators can include those that mimic the bridge, engine rooms, cargo handling bays,
communications or remotely operated vehicles. These are used in training institutions,
colleges and navies.

Military Applications

Sometimes referred to as ‘war games,’ military simulations can be used to test out military
plans in a virtual environment using computer models. These can also incorporate social
and political factors and are used by governments and military organisations around the
world.

Network Systems
Simulations have been applied to network and distributed systems to test new algorithms
and protocols before they are implemented in live systems. These can be applied to
applications including content delivery networks, smart cities and the Internet of Things.

Project Management

Simulation can be used for project management analysis and training purposes. Whether
training managers or analysing the outcomes of different decisions, simulation is frequently
conducted with software tools.

Robotics

Robotics simulations are used to mimic situations that may not be possible to recreate and
test in real life due to time, cost or other factors. The results of these tests can then be
assessed and transferred to real life robots.

Production Systems

Production systems can be simulated using methods such as discrete event simulation to
assess manufacturing processes, assembly times, machine set-up, and more.

Sales

Sales can be simulated to examine the flow of transactions and customer orders as well as
costs, labour times and more.

Satellites and Space

The Kennedy Space Centre used simulation to train space shuttle engineers for launch
operations. This would see people interact with a simulated shuttle and ground support
equipment. Simulation is also used for satellite navigation tests.

Sport

Statistics are widely used as part of sport simulation to predict the outcome of events and
the performance of individual sportspeople. Sports simulation can also be used to predict
the outcome of games and events as well as for fantasy sports leagues. Biomechanics
models can also be used to assist training, assess fatigue levels and their effect on
performance and more.

Weather

Weather forecasting uses simulations based on past data to predict extreme weather
conditions such as hurricanes or cyclones.

Conclusion
Simulations are used for a range of applications across industry, saving time and expense
while being able to test theories and ideas before implementing them in the real world.
Although related techniques such as digital twin may provide added benefits due to the two-
way flow of information this allows, simulations still have a great many uses.

Whether testing theories, assessing procedural performance or determining the lifecycle of an asset
simulation is a useful tool for many businesses and organisations.

MONTE – CARLO SIMULATION

What is the Monte Carlo Simulation?

The Monte Carlo simulation is a mathematical technique that predicts possible
outcomes of an uncertain event. Computer programs use this method to analyze
past data and predict a range of future outcomes based on a choice of action. For
example, if you want to estimate the first month’s sales of a new product, you can
give the Monte Carlo simulation program your historical sales data. The program will
estimate different sales values based on factors such as general market conditions,
product price, and advertising budget.

Why is the Monte Carlo simulation important?

 The Monte Carlo simulation is a probabilistic model that can include an element of
uncertainty or randomness in its prediction. When you use a probabilistic model to
simulate an outcome, you will get different results each time. For example, the
distance between your home and office is fixed. However, a probabilistic simulation
might predict different travel times by considering factors such as congestion, bad
weather, and vehicle breakdowns.

In contrast, conventional forecasting methods are more deterministic. They provide

a definite answer to the prediction and cannot factor in uncertainty. For instance,
they might tell you the minimum and maximum travel time, but both answers are
less accurate.

Benefits of the Monte Carlo simulation

The Monte Carlo simulation provides multiple possible outcomes and the probability
of each from a large pool of random data samples. It offers a clearer picture than a
deterministic forecast. For instance, forecasting financial risks requires analyzing
dozens or hundreds of risk factors. Financial analysts use the Monte Carlo
simulation to produce the probability of every possible outcome.

History of the Monte Carlo simulation

John von Neumann and Stanislaw Ulam invented the Monte Carlo simulation, or the
Monte Carlo method, in the 1940s. They named it after the famous gambling location
in Monaco because the method shares the same random characteristic as a roulette
game.

What are the Monte Carlo simulation use cases?

Companies use Monte Carlo methods to assess risks and make accurate long-term
predictions. The following are some examples of use cases.

Business

Business leaders use Monte Carlo methods to project realistic scenarios when
making decisions. For example, a marketer needs to decide whether it's feasible to
increase the advertising budget for an online yoga course. They could use the Monte
Carlo mathematical model on uncertain factors or variables such as the following:

 Subscription fee

 Advertising cost

 Sign-up rate

 Retention

The simulation would then predict the impact of changes on these factors to
indicate whether the decision is profitable.

Finance

Financial analysts often make long-term forecasts on stock prices and then advise
their clients of appropriate strategies. While doing so, they must consider market
factors that could cause drastic changes to the investment value. As a result, they
use the Monte Carlo simulation to predict probable outcomes to support their
strategies.

Online gaming

Strict regulations govern the online gaming and betting industry. Customers expect
gaming software to be fair and mimic the characteristics of its physical counterpart.
Therefore, game programmers use the Monte Carlo method to simulate results and
ensure a fair-play experience.

Engineering

Engineers must ensure the reliability and robustness of every product and system
they create before making it available to the public. They use Monte Carlo methods
to simulate a product’s probable failure rate based on existing variables. For
example, mechanical engineers use the Monte Carlo simulation to estimate the
durability of an engine when it operates in various conditions.

How does the Monte Carlo simulation work?

The basic principle of the Monte Carlo simulation lies in ergodicity, which describes
the statistical behavior of a moving point in an enclosed system. The moving point
will eventually pass through every possible location in an ergodic system. This
becomes the basis of the Monte Carlo simulation, in which the computer runs
enough simulations to produce the eventual outcome of different inputs.

For example, a six-sided die has a one-sixth chance of landing on a specific number.
When you roll the die six times, you might not land the die on six different numbers.
However, you will achieve the theoretical probability of one-sixth for each number
when you continue indefinitely rolling. The result accuracy is proportional to the
number of simulations. In other words, running 10,000 simulations produces more
accurate results than 100 simulations.

The Monte Carlo simulation works the same way. It uses a computer system to run
enough simulations to produce different outcomes that mimic real-life results. The
system uses random number generators to recreate the inherent uncertainty of the
input parameters. Random number generators are computer programs that produce
an unpredictable sequence of random numbers.

The Monte Carlo simulation compared to machine learning

Machine learning (ML) is a computer technology that uses a large sample of input
and output (I/O) data to train software to understand the correlation between both.
A Monte Carlo simulation, on the other hand, uses samples of input data and a
known mathematical model to predict probable outcomes occurring in a system.
You use ML models to test and confirm the results in Monte Carlo simulations.

What are the components of a Monte Carlo

simulation?
A Monte Carlo analysis consists of input variables, output variables, and a
mathematical model. The computer system feeds independent variables into a
mathematical model, simulates them, and produces dependent variables.
Input variables

Input variables are random values that affect the outcome of the Monte Carlo
simulation. For example, manufacturing quality and temperature are input
variables that influence a smartphone's durability. You can express input variables
as a range of random value samples so Monte Carlo methods can simulate the
results with random input values.

Output variable

The output variable is the result of the Monte Carlo analysis. For example, an
electronic device’s life expectancy is an output variable, with its value being a time
such as 6 months or 2 years. The Monte Carlo simulation software shows the output
variable in a histogram or graph that distributes the result in a continuous range on
the horizontal axis.

Mathematical model

A mathematical model is an equation that describes the relationship between

output and input variables in mathematical form. For example, the mathematical
model for profitability is Profit = Revenue − Expenses.

The Monte Carlo software replaces revenue and expenses with probable values
based on the probability distribution type. Then it repeats the simulation to get a
highly accurate result. The Monte Carlo simulation can run for hours when the
mathematical model involves many random variables.

What are probability distributions in the Monte

Carlo simulation?
Probability distributions are statistical functions that represent a range of values
distributed between limits. Statistics experts use probability distributions to predict
the possible occurrence of an uncertain variable, which might consist of discrete or
continuous values.

Discrete probability distribution is represented by whole numbers or a sequence of

finite numbers. Each of the discrete values has a probability greater than zero.
Statisticians plot discrete probability distribution on a table, but they plot
continuous probability distribution as a curve between two given points on the x-
axis of a graph. The following are common types of probability distributions that a
Monte Carlo simulation can model.

Normal distribution

Normal distribution, also known as the bell curve, is symmetrically shaped like a
bell and represents most real-life events. The possibility of a random value at the
median is high, and the probability significantly decreases toward both ends of the
bell curve. For example, a repeated random sampling of the weight of students in a
particular classroom gives you a normal distribution chart.

Uniform distribution
Uniform distribution refers to a statistical representation of random variables with
equal chance. When plotted on a chart, the uniformly distributed variables appear as
a horizontal flat line across the valid range. For example, the uniform distribution
represents the likelihood of rolling and landing on each side of a die.

Triangular distribution

Triangular distribution uses minimum, maximum, and most-likely values to represent

random variables. Its probability peaks at the most-likely value. For example,
companies use triangular distribution to predict upcoming sales volumes by
establishing the triangle's minimum, maximum, and peak value.

What are the steps in performing the Monte Carlo

simulation?
The Monte Carlo method involves the following steps.

Establish the mathematical model

Define an equation that brings the output and input variables together.
Mathematical models can range from basic business formulas to complex scientific
equations.

Determine the input values

Choose from the different types of probability distributions to represent the input
values. For example, the operating temperature of a mobile phone is likely to be a
bell curve since the device runs at room temperature most of the time.

Create a sample dataset

Create a large dataset of random samples based on the chosen probability

distribution. The sample size should be in the range of 100,000 to produce accurate
results.

Set up the Monte Carlo simulation software

Use the input samples and mathematical model to configure and run the Monte
Carlo simulation software. Result times can vary depending on the number of input
variables, and you might have to wait for the results.

Analyze the results

Check the simulated results to find how the output distributes on the histogram.
Use statistical tools to calculate parameters, such as mean value, standard
deviation, and variant, to determine whether the result falls within your expectation.

What are the challenges of the Monte Carlo

simulation?
These are two common challenges when using Monte Carlo simulations:
 The Monte Carlo simulation is highly dependent on the input values and distribution.
If mistakes are made when electing the input and probability distribution, it can
lead to inaccurate results.

It might take excessive computational power to perform Monte Carlo experiments.

Computing with the Monte Carlo method can take hours or days to complete on a
single computer.

Monte Carlo simulation gets its name from which of the following?

A. Data collection
B. Model formulation
C. Random-number assignment
D. Analysi