1. To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 15-1 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ 07458 Chapter 15 Simulation Modeling

2. To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 15-2 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ 07458 Learning Objectives Students will be able to Tackle a wide variety of problems by 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 the alternative simulation packages available commercially

3. To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 15-3 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ 07458 Chapter Outline 15.1 Introduction 15.2 Advantages and Disadvantages of Simulation 15.3 Monte Carlo Simulation 15.4 Simulation and Inventory Analysis 15.5 Simulation of a Queuing Problem 15.6 Fixed Time Increment and Next Event Increment Simulation Models 15.7 Simulation Model for Maintenance Policy 15.8 Two Other Types of Simulation 15.9 Role of Computers in Simulation

4. To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 15-4 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ 07458 Philosophy of Simulation Imitate a real-world situation mathematically Study its properties and operating characteristics Draw conclusions and make action decisions

5. To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 15-5 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ 07458 Advantages of Simulation Relatively straightforward and flexible Recent advances in software make some simulation models very easy to develop Enables analysis of large, complex, real-world situations Allows “what-if?” questions Does not interfere with real-world system Enables study of interactions Enables time compression Enables the inclusion of real-world complications

6. To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 15-6 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ 07458 Disadvantages of Simulation Often requires long, expensive development process Does not generate optimal solutions Requires managers to generate all conditions and constraints of real-world problem Each model is unique

7. To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 15-7 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ 07458 Simulation Models Categories Monte Carlo Operational Gaming Systems Simulation

8. To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 15-8 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ 07458 Monte Carlo Simulation Five steps: 1. Set up probability distributions 2. Build cumulative probability distributions 3. Establish interval of random numbers for each variable 4. Generate random numbers 5. Simulate trials

9. To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 15-9 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ 07458 Variables We May Wish to Simulate Inventory demand on daily or weekly basis Lead time for inventory orders to arrive Times between machine breakdowns Times between arrivals at service facility Service times Times to complete project activities Number of employees absent from work each day

10. To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 15-10 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ 07458 Harry’s Auto Tire

11. To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 15-11 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ 07458 Harry’s Auto Tire

12. To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 15-12 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ 07458 Harry’s Auto Tire Demand Frequency Probability Cumulative Probability Random Number Interval 0100.05 01 - 05 1200.100.1506 - 15 2400.200.3516 - 35 3600.300.6536 - 65 4400.200.8566 - 85 5300.151.0086 - 00

13. To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 15-13 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ 07458 52 37 82 69 98 96 33 50 88 90 50 27 45 81 66 74 30 06 63 57 02 94 52 69 33 32 30 48 88 14 02 83 05 34 50 28 68 36 90 62 27 50 18 36 61 21 46 01 14 82 87 88 02 28 49 36 87 21 95 50 24 18 62 32 78 74 82 01 53 74 05 71 06 49 11 13 62 69 85 69 13 82 27 93 74 30 35 94 99 78 56 60 44 57 82 23 64 49 74 76 09 11 10 24 03 32 23 59 95 34 51 08 48 66 97 03 96 46 47 03 11 10 67 23 89 62 56 74 54 31 62 37 33 82 99 29 27 75 89 78 68 64 62 30 17 12 74 45 11 52 59 37 60 79 21 85 71 48 39 31 35 12 73 41 31 97 78 94 66 74 90 95 29 72 17 55 15 36 80 02 86 94 59 13 25 91 85 87 90 21 90 89 29 40 85 69 68 98 99 81 06 34 35 90 92 94 25 57 34 30 90 01 24 00 92 42 72 28 32 73 41 38 73 01 09 64 34 55 84 16 98 49 00 30 23 00 59 09 97 69 98 93 49 51 92 16 84 27 64 94 17 84 55 25 71 34 57 50 44 95 64 16 46 54 64 61 23 01 57 17 36 72 85 31 44 30 26 09 49 13 33 89 13 37 58 07 60 77 49 76 95 51 16 14 85 59 85 40 42 52 39 73 Random Number Table

14. To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 15-14 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ 07458 Three Hills Power Generator Breakdown Times ½50.05 01 - 05 160.060.1106 - 11 1 ½160.160.2712 - 27 2330.330.6028 - 60 2 ½210.210.8181 - 81 3190.191.0082 - 00 Time Between Breakdowns (Hours) Number of Times Observed Probability Cumulative Probability Random Number Interval

15. To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 15-15 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ 07458 Three Hills Power Generator Repair Times 1280.28 01 - 28 2520.520.8029 - 80 3200.201.0081 - 00 Repair Time Required (Hours) Number of Times Observed Probability Cumulative Probability Random Number Interval

16. To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 15-16 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ 07458 Operational Gaming Simulation involving competing players Examples: Military games Business games

17. To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 15-17 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ 07458 Systems Simulation Large, dynamic systems Examples: Corporate operating system Urban government Economic systems

18. To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 15-18 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ 07458 Inputs/Outputs of an Economic Model Income Tax Levels Corporate Tax Rates Interest Rates Government Spending Foreign Trade Policy Economic Model GNP Inflation Rates Unemployment Rates Monetary Supplies Population Growth Rates