Harrell−Ghosh−Bowden: I. Study Chapters 3.

Simulation Basics © The McGraw−Hill

Simulation Using Companies, 2004
ProModel, Second Edition

C H A P T E R

3 SIMULATION BASICS

“Zeal without knowledge is fire without light.”

—Dr. Thomas Fuller

3.1 Introduction
Simulation is much more meaningful when we understand what it is actually doing.
Understanding how simulation works helps us to know whether we are applying it
correctly and what the output results mean. Many books have been written that give
thorough and detailed discussions of the science of simulation (see Banks et al. 2001;
Hoover and Perry 1989; Law and Kelton 2000; Pooch and Wall 1993; Ross 1990;
Shannon 1975; Thesen and Travis 1992; and Widman, Loparo, and Nielsen 1989).
This chapter attempts to summarize the basic technical issues related to simulation
that are essential to understand in order to get the greatest benefit from the tool. The
chapter discusses the different types of simulation and how random behavior is sim-
ulated. A spreadsheet simulation example is given in this chapter to illustrate how
various techniques are combined to simulate the behavior of a common system.

3.2 Types of Simulation

The way simulation works is based largely on the type of simulation used. There
are many ways to categorize simulation. Some of the most common include
• Static or dynamic.
• Stochastic or deterministic.
• Discrete event or continuous.
The type of simulation we focus on in this book can be classified as dynamic,
stochastic, discrete-event simulation. To better understand this classification, we

47
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48 Part I Study Chapters

will look at what the first two characteristics mean in this chapter and focus on
what the third characteristic means in Chapter 4.

3.2.1 Static versus Dynamic Simulation

A static simulation is one that is not based on time. It often involves drawing
random samples to generate a statistical outcome, so it is sometimes called Monte
Carlo simulation. In finance, Monte Carlo simulation is used to select a portfolio of
stocks and bonds. Given a portfolio, with different probabilistic payouts, it is
possible to generate an expected yield. One material handling system supplier
developed a static simulation model to calculate the expected time to travel from
one rack location in a storage system to any other rack location. A random sample
of 100 from–to relationships were used to estimate an average travel time. Had
every from–to trip been calculated, a 1,000-location rack would have involved
1,000! calculations.
Dynamic simulation includes the passage of time. It looks at state changes as
they occur over time. A clock mechanism moves forward in time and state vari-
ables are updated as time advances. Dynamic simulation is well suited for
analyzing manufacturing and service systems since they operate over time.

3.2.2 Stochastic versus Deterministic Simulation

Simulations in which one or more input variables are random are referred to as
stochastic or probabilistic simulations. A stochastic simulation produces output
that is itself random and therefore gives only one data point of how the system
might behave.
Simulations having no input components that are random are said to be
deterministic. Deterministic simulation models are built the same way as stochas-
tic models except that they contain no randomness. In a deterministic simulation,
all future states are determined once the input data and initial state have been
defined.
As shown in Figure 3.1, deterministic simulations have constant inputs and
produce constant outputs. Stochastic simulations have random inputs and produce
random outputs. Inputs might include activity times, arrival intervals, and routing
sequences. Outputs include metrics such as average flow time, flow rate, and re-
source utilization. Any output impacted by a random input variable is going to
also be a random variable. That is why the random inputs and random outputs of
Figure 3.1(b) are shown as statistical distributions.
A deterministic simulation will always produce the exact same outcome no
matter how many times it is run. In stochastic simulation, several randomized runs
or replications must be made to get an accurate performance estimate because
each run varies statistically. Performance estimates for stochastic simulations are
obtained by calculating the average value of the performance metric across all of
the replications. In contrast, deterministic simulations need to be run only once to
get precise results because the results are always the same.
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Chapter 3 Simulation Basics 49

FIGURE 3.1
Examples of (a) a deterministic simulation and (b) a stochastic simulation.

Constant Constant Random Random

inputs outputs inputs outputs

7
12.3
3.4 Simulation Simulation
106
5

(a) (b)

3.3 Random Behavior

Stochastic systems frequently have time or quantity values that vary within a
given range and according to specified density, as defined by a probability distri-
bution. Probability distributions are useful for predicting the next time, distance,
quantity, and so forth when these values are random variables. For example, if an
operation time varies between 2.2 minutes and 4.5 minutes, it would be defined in
the model as a probability distribution. Probability distributions are defined by
specifying the type of distribution (normal, exponential, or another type) and the
parameters that describe the shape or density and range of the distribution. For
example, we might describe the time for a check-in operation to be normally
distributed with a mean of 5.2 minutes and a standard deviation of 0.4 minute.
During the simulation, values are obtained from this distribution for successive
operation times. The shape and range of time values generated for this activity
will correspond to the parameters used to define the distribution. When we gener-
ate a value from a distribution, we call that value a random variate.
Probability distributions from which we obtain random variates may be
either discrete (they describe the likelihood of specific values occurring) or
continuous (they describe the likelihood of a value being within a given range).
Figure 3.2 shows graphical examples of a discrete distribution and a continuous
distribution.
A discrete distribution represents a finite or countable number of possible
values. An example of a discrete distribution is the number of items in a lot or
individuals in a group of people. A continuous distribution represents a continuum
of values. An example of a continuous distribution is a machine with a cycle time
that is uniformly distributed between 1.2 minutes and 1.8 minutes. An infinite
number of possible values exist within this range. Discrete and continuous
distributions are further defined in Chapter 6. Appendix A describes many of the
distributions used in simulation.
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FIGURE 3.2 p (x) 1.0

Examples of (a) a
discrete probability .8
distribution and (b) a
continuous probability
distribution. .6 (a )

.4

.2

0
0 1 2 3 4 5 6 7 x
Discrete Value

f (x) 1.0

.8

.6
(b )

.4

.2

0
0 1 2 3 4 5 6 7 x
Continuous Value

3.4 Simulating Random Behavior

One of the most powerful features of simulation is its ability to mimic random
behavior or variation that is characteristic of stochastic systems. Simulating
random behavior requires that a method be provided to generate random numbers
as well as routines for generating random variates based on a given probability dis-
tribution. Random numbers and random variates are defined in the next sections
along with the routines that are commonly used to generate them.

3.4.1 Generating Random Numbers

Random behavior is imitated in simulation by using a random number generator.
The random number generator operates deep within the heart of a simulation
model, pumping out a stream of random numbers. It provides the foundation for
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Chapter 3 Simulation Basics 51

FIGURE 3.3 f (x)

The uniform(0,1)
distribution of a
random number
generator. f (x ) ! { 10 for 0 " x " 1
elsewhere
1.0
Mean ! ! ! 1
2

Variance ! " 2 ! 1
12
0 1.0 x

simulating “random” events occurring in the simulated system such as the arrival
time of cars to a restaurant’s drive-through window; the time it takes the driver to
place an order; the number of hamburgers, drinks, and fries ordered; and the time
it takes the restaurant to prepare the order. The input to the procedures used to
generate these types of events is a stream of numbers that are uniformly distrib-
uted between zero and one (0 ≤ x ≤ 1). The random number generator is respon-
sible for producing this stream of independent and uniformly distributed numbers
(Figure 3.3).
Before continuing, it should be pointed out that the numbers produced by a
random number generator are not “random” in the truest sense. For example, the
generator can reproduce the same sequence of numbers again and again, which is
not indicative of random behavior. Therefore, they are often referred to as pseudo-
random number generators (pseudo comes from Greek and means false or fake).
Practically speaking, however, “good” pseudo-random number generators can
pump out long sequences of numbers that pass statistical tests for randomness (the
numbers are independent and uniformly distributed). Thus the numbers approxi-
mate real-world randomness for purposes of simulation, and the fact that they are
reproducible helps us in two ways. It would be difficult to debug a simulation
program if we could not “regenerate” the same sequence of random numbers to re-
produce the conditions that exposed an error in our program. We will also learn in
Chapter 10 how reproducing the same sequence of random numbers is useful
when comparing different simulation models. For brevity, we will drop the
pseudo prefix as we discuss how to design and keep our random number generator
healthy.

Linear Congruential Generators

There are many types of established random number generators, and researchers
are actively pursuing the development of new ones (L’Ecuyer 1998). However,
most simulation software is based on linear congruential generators (LCG). The
LCG is efficient in that it quickly produces a sequence of random numbers with-
out requiring a great deal of computational resources. Using the LCG, a sequence
of integers Z1, Z2, Z3, . . . is defined by the recursive formula
Z i = (a Z i−1 + c) mod(m)
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where the constant a is called the multiplier, the constant c the increment, and the
constant m the modulus (Law and Kelton 2000). The user must provide a seed or
starting value, denoted Z 0, to begin generating the sequence of integer values. Z 0,
a, c, and m are all nonnegative integers. The value of Zi is computed by dividing
(aZ i−1 + c) by m and setting Z i equal to the remainder part of the division, which
is the result returned by the mod function. Therefore, the Zi values are bounded by
0 ≤ Zi ≤ m − 1 and are uniformly distributed in the discrete case. However, we
desire the continuous version of the uniform distribution with values ranging
between a low of zero and a high of one, which we will denote as Ui for i = 1, 2,
3, . . . . Accordingly, the value of Ui is computed by dividing Zi by m.
In a moment, we will consider some requirements for selecting the values for
a, c, and m to ensure that the random number generator produces a long sequence
of numbers before it begins to repeat them. For now, however, let’s assign the fol-
lowing values a = 21, c = 3, and m = 16 and generate a few pseudo-random
numbers. Table 3.1 contains a sequence of 20 random numbers generated from the
recursive formula
Zi = (21Z i−1 + 3) mod(16)
An integer value of 13 was somewhat arbitrarily selected between 0 and
m − 1 = 16 − 1 = 15 as the seed (Z 0 = 13) to begin generating the sequence of

TABLE 3.1 Example LCG Zi = (21Zi−1 + 3) mod(16),

with Z0 = 13

i 21Zi−1 + 3 Zi Ui = Zi /16

0 13
1 276 4 0.2500
2 87 7 0.4375
3 150 6 0.3750
4 129 1 0.0625
5 24 8 0.5000
6 171 11 0.6875
7 234 10 0.6250
8 213 5 0.3125
9 108 12 0.7500
10 255 15 0.9375
11 318 14 0.8750
12 297 9 0.5625
13 192 0 0.0000
14 3 3 0.1875
15 66 2 0.1250
16 45 13 0.8125
17 276 4 0.2500
18 87 7 0.4375
19 150 6 0.3750
20 129 1 0.0625
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numbers in Table 3.1. The value of Z1 is obtained as

Z1 = (aZ 0 + c) mod(m) = (21(13) + 3) mod(16) = (276) mod(16) = 4
Note that 4 is the remainder term from dividing 16 into 276. The value of U1 is
computed as
U1 = Z1/16 = 4/16 = 0.2500
The process continues using the value of Z1 to compute Z 2 and then U2.
Changing the value of Z 0 produces a different sequence of uniform(0,1)
numbers. However, the original sequence can always be reproduced by setting the
seed value back to 13 (Z 0 = 13). The ability to repeat the simulation experiment
under the exact same “random” conditions is very useful, as will be demonstrated
in Chapter 10 with a technique called common random numbers.
Note that in ProModel the sequence of random numbers is not generated in
advance and then read from a table as we have done. Instead, the only value saved
is the last Z i value that was generated. When the next random number in the se-
quence is needed, the saved value is fed back to the generator to produce the next
random number in the sequence. In this way, the random number generator is
called each time a new random event is scheduled for the simulation.
Due to computational constraints, the random number generator cannot go on
indefinitely before it begins to repeat the same sequence of numbers. The LCG in
Table 3.1 will generate a sequence of 16 numbers before it begins to repeat itself.
You can see that it began repeating itself starting in the 17th position. The value of
16 is referred to as the cycle length of the random number generator, which is dis-
turbingly short in this case. A long cycle length is desirable so that each replication
of a simulation is based on a different segment of random numbers. This is how
we collect independent observations of the model’s output.
Let’s say, for example, that to run a certain simulation model for one replica-
tion requires that the random number generator be called 1,000 times during the
simulation and we wish to execute five replications of the simulation. The first
replication would use the first 1,000 random numbers in the sequence, the second
replication would use the next 1,000 numbers in the sequence (the number that
would appear in positions 1,001 to 2,000 if a table were generated in advance), and
so on. In all, the random number generator would be called 5,000 times. Thus we
would need a random number generator with a cycle length of at least 5,000.
The maximum cycle length that an LCG can achieve is m. To realize the
maximum cycle length, the values of a, c, and m have to be carefully selected.
A guideline for the selection is to assign (Pritsker 1995)
1. m = 2b, where b is determined based on the number of bits per word on
the computer being used. Many computers use 32 bits per word, making
31 a good choice for b.
2. c and m such that their greatest common factor is 1 (the only positive
integer that exactly divides both m and c is 1).
3. a = 1 + 4k, where k is an integer.
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Following this guideline, the LCG can achieve a full cycle length of over 2.1
billion (231 to be exact) random numbers.
Frequently, the long sequence of random numbers is subdivided into smaller
segments. These subsegments are referred to as streams. For example, Stream 1
could begin with the random number in the first position of the sequence and
continue down to the random number in the 200,000th position of the sequence.
Stream 2, then, would start with the random number in the 200,001st position of
the sequence and end at the 400,000th position, and so on. Using this approach,
each type of random event in the simulation model can be controlled by a unique
stream of random numbers. For example, Stream 1 could be used to generate the
arrival pattern of cars to a restaurant’s drive-through window and Stream 2 could
be used to generate the time required for the driver of the car to place an order.
This assumes that no more than 200,000 random numbers are needed to simulate
each type of event. The practical and statistical advantages of assigning unique
streams to each type of event in the model are described in Chapter 10.
To subdivide the generator’s sequence of random numbers into streams, you
first need to decide how many random numbers to place in each stream. Next, you
begin generating the entire sequence of random numbers (cycle length) produced
by the generator and recording the Zi values that mark the beginning of each stream.
Therefore, each stream has its own starting or seed value. When using the random
number generator to drive different events in a simulation model, the previously
generated random number from a particular stream is used as input to the generator
to generate the next random number from that stream. For convenience, you may
want to think of each stream as a separate random number generator to be used in
different places in the model. For example, see Figure 10.5 in Chapter 10.
There are two types of linear congruential generators: the mixed congruential
generator and the multiplicative congruential generator. Mixed congruential gener-
ators are designed by assigning c > 0. Multiplicative congruential generators are
designed by assigning c = 0. The multiplicative generator is more efficient than the
mixed generator because it does not require the addition of c. The maximum cycle
length for a multiplicative generator can be set within one unit of the maximum
cycle length of the mixed generator by carefully selecting values for a and m. From
a practical standpoint, the difference in cycle length is insignificant considering that
both types of generators can boast cycle lengths of more than 2.1 billion.
ProModel uses the following multiplicative generator:
Zi = (630,360,016Zi−1) mod(231 − 1)
Specifically, it is a prime modulus multiplicative linear congruential generator
(PMMLCG) with a = 630,360,016, c = 0, and m = 231 − 1. It has been exten-
sively tested and is known to be a reliable random number generator for simula-
tion (Law and Kelton 2000). The ProModel implementation of this generator
divides the cycle length of 231 − 1 = 2,147,483,647 into 100 unique streams.

Testing Random Number Generators

When faced with using a random number generator about which you know very
little, it is wise to verify that the numbers emanating from it satisfy the two
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Chapter 3 Simulation Basics 55

important properties defined at the beginning of this section. The numbers pro-
duced by the random number generator must be (1) independent and (2) uniformly
distributed between zero and one (uniform(0,1)). To verify that the generator
satisfies these properties, you first generate a sequence of random numbers U1, U2,
U3, . . . and then subject them to an appropriate test of hypothesis.
The hypotheses for testing the independence property are
H 0: Ui values from the generator are independent
H1: Ui values from the generator are not independent
Several statistical methods have been developed for testing these hypotheses at
a specified significance level α. One of the most commonly used methods is
the runs test. Banks et al. (2001) review three different versions of the runs test
for conducting this independence test. Additionally, two runs tests are imple-
mented in Stat::Fit—the Runs Above and Below the Median Test and the Runs
Up and Runs Down Test. Chapter 6 contains additional material on tests for
independence.
The hypotheses for testing the uniformity property are
H 0: Ui values are uniform(0,1)
H1: Ui values are not uniform(0,1)
Several statistical methods have also been developed for testing these hypotheses
at a specified significance level α. The Kolmogorov-Smirnov test and the chi-
square test are perhaps the most frequently used tests. (See Chapter 6 for a de-
scription of the chi-square test.) The objective is to determine if the uniform(0,1)
distribution fits or describes the sequence of random numbers produced by the
random number generator. These tests are included in the Stat::Fit software and
are further described in many introductory textbooks on probability and statistics
(see, for example, Johnson 1994).

3.4.2 Generating Random Variates

This section introduces common methods for generating observations (random
variates) from probability distributions other than the uniform(0,1) distribution.
For example, the time between arrivals of cars to a restaurant’s drive-through
window may be exponentially distributed, and the time required for drivers to
place orders at the window might follow the lognormal distribution. Observations
from these and other commonly used distributions are obtained by transforming
the observations generated by the random number generator to the desired distri-
bution. The transformed values are referred to as variates from the specified
distribution.
There are several methods for generating random variates from a desired dis-
tribution, and the selection of a particular method is somewhat dependent on the
characteristics of the desired distribution. Methods include the inverse transfor-
mation method, the acceptance/rejection method, the composition method, the
convolution method, and the methods employing special properties. The inverse
transformation method, which is commonly used to generate variates from both
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discrete and continuous distributions, is described starting first with the continu-
ous case. For a review of the other methods, see Law and Kelton (2000).

Continuous Distributions
The application of the inverse transformation method to generate random variates
from continuous distributions is straightforward and efficient for many continu-
ous distributions. For a given probability density function f (x), find the cumula-
tive distribution function of X. That is, F(x) = P(X ≤ x). Next, set U = F(x),
where U is uniform(0,1), and solve for x. Solving for x yields x = F−1(U ). The
equation x = F−1(U) transforms U into a value for x that conforms to the given
distribution f(x).
As an example, suppose that we need to generate variates from the exponential
distribution with mean β. The probability density function f (x) and corresponding
cumulative distribution function F(x) are

⎨ 1 −x /β
⎧
e for x > 0
f(x) = β
0 elsewhere
⎩

1 − e−x /β for x > 0

$
F(x) =
0 elsewhere
Setting U = F(x) and solving for x yields
U = 1 − e−x/β
e−x/β = 1 − U
ln (e−x/β) = ln (1 − U) where ln is the natural logarithm
−x/β = ln (1 − U)
x = −β ln (1 − U)
The random variate x in the above equation is exponentially distributed with mean
β provided U is uniform(0,1).
Suppose three observations of an exponentially distributed random variable
with mean β = 2 are desired. The next three numbers generated by the random
number generator are U1 = 0.27, U2 = 0.89, and U3 = 0.13. The three numbers
are transformed into variates x1, x2, and x3 from the exponential distribution with
mean β = 2 as follows:
x1 = −2 ln (1 − U1) = −2 ln (1 − 0.27) = 0.63
x2 = −2 ln (1 − U2) = −2 ln (1 − 0.89) = 4.41
x3 = −2 ln (1 − U3) = −2 ln (1 − 0.13) = 0.28
Figure 3.4 provides a graphical representation of the inverse transformation
method in the context of this example. The first step is to generate U, where U is
uniform(0,1). Next, locate U on the y axis and draw a horizontal line from that
point to the cumulative distribution function [F(x) = 1 − e−x/2]. From this point
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FIGURE 3.4 F (x)

Graphical explanation
of inverse 1.00
transformation method U2 = 1 – e –x2/ 2 = 0.89
for continuous
variates.

0.50

U1 = 1 – e –x1/ 2 = 0.27

x1 = –2 ln (1 – 0.27) = 0.63 x2 = –2 ln (1 – 0.89) = 4.41

of intersection with F(x), a vertical line is dropped down to the x axis to obtain the
corresponding value of the variate. This process is illustrated in Figure 3.4 for
generating variates x1 and x2 given U1 = 0.27 and U2 = 0.89.
Application of the inverse transformation method is straightforward as long
as there is a closed-form formula for the cumulative distribution function, which
is the case for many continuous distributions. However, the normal distribution is
one exception. Thus it is not possible to solve for a simple equation to generate
normally distributed variates. For these cases, there are other methods that can be
used to generate the random variates. See, for example, Law and Kelton (2000)
for a description of additional methods for generating random variates from
continuous distributions.

Discrete Distributions
The application of the inverse transformation method to generate variates from
discrete distributions is basically the same as for the continuous case. The differ-
ence is in how it is implemented. For example, consider the following probability
mass function:
⎧
⎨ 0.10 for x = 1
p(x) = P(X = x) = 0.30 for x = 2
0.60 for x = 3
⎩

The random variate x has three possible values. The probability that x is equal to
1 is 0.10, P(X = 1) = 0.10; P(X = 2) = 0.30; and P(X = 3) = 0.60. The cumula-
tive distribution function F(x) is shown in Figure 3.5. The random variable x
could be used in a simulation to represent the number of defective components on
a circuit board or the number of drinks ordered from a drive-through window, for
example.
Suppose that an observation from the above discrete distribution is desired.
The first step is to generate U, where U is uniform(0,1). Using Figure 3.5, the
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FIGURE 3.5 F (x )
Graphical explanation 1.00
of inverse
transformation method U 2 = 0.89
for discrete variates.

0.40

U 1 = 0.27

0.10
U 3 = 0.05
1 2 3
x3 = 1 x1 = 2 x2 ! 3

value of the random variate is determined by locating U on the y axis, drawing a

horizontal line from that point until it intersects with a step in the cumulative
function, and then dropping a vertical line from that point to the x axis to read the
value of the variate. This process is illustrated in Figure 3.5 for x1, x2, and x3 given
U1 = 0.27, U2 = 0.89, and U3 = 0.05. Equivalently, if 0 ≤ Ui ≤ 0.10, then xi = 1;
if 0.10 < Ui ≤ 0.40, then xi = 2; if 0.40 < Ui ≤ 1.00, then xi = 3. Note that
should we generate 100 variates using the above process, we would expect a value
of 3 to be returned 60 times, a value of 2 to be returned 30 times, and a value of 1
to be returned 10 times.
The inverse transformation method can be applied to any discrete distribution
by dividing the y axis into subintervals as defined by the cumulative distribution
function. In our example case, the subintervals were [0, 0.10], (0.10, 0.40], and
(0.40, 1.00]. For each subinterval, record the appropriate value for the random
variate. Next, develop an algorithm that calls the random number generator to
receive a specific value for U, searches for and locates the subinterval that contains
U, and returns the appropriate value for the random variate.
Locating the subinterval that contains a specific U value is relatively straight-
forward when there are only a few possible values for the variate. However,
the number of possible values for a variate can be quite large for some discrete
distributions. For example, a random variable having 50 possible values could
require that 50 subintervals be searched before locating the subinterval that
contains U. In such cases, sophisticated search algorithms have been developed
that quickly locate the appropriate subinterval by exploiting certain characteristics
of the discrete distribution for which the search algorithm was designed. A good
source of information on the subject can be found in Law and Kelton (2000).
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Chapter 3 Simulation Basics 59

3.5 Simple Spreadsheet Simulation

This chapter has covered some really useful information, and it will be construc-
tive to pull it all together for our first dynamic, stochastic simulation model. The
simulation will be implemented as a spreadsheet model because the example
system is not so complex as to require the use of a commercial simulation soft-
ware product. Furthermore, a spreadsheet will provide a nice tabulation of the
random events that produce the output from the simulation, thereby making it
ideal for demonstrating how simulations of dynamic, stochastic systems are often
accomplished. The system to be simulated follows.
Customers arrive to use an automatic teller machine (ATM) at a mean inter-
arrival time of 3.0 minutes exponentially distributed. When customers arrive to
the system they join a queue to wait for their turn on the ATM. The queue has the
capacity to hold an infinite number of customers. Customers spend an average of
2.4 minutes exponentially distributed at the ATM to complete their transactions,
which is called the service time at the ATM. Simulate the system for the arrival
and processing of 25 customers and estimate the expected waiting time for cus-
tomers in the queue (the average time customers wait in line for the ATM) and the
expected time in the system (the average time customers wait in the queue plus the
average time it takes them to complete their transaction at the ATM).
Using the systems terminology introduced in Chapter 2 to describe the ATM
system, the entities are the customers that arrive to the ATM for processing. The
resource is the ATM that serves the customers, which has the capacity to serve one
customer at a time. The system controls that dictate how, when, and where activ-
ities are performed for this ATM system consist of the queuing discipline, which
is first-in, first-out (FIFO). Under the FIFO queuing discipline the entities
(customers) are processed by the resource (ATM) in the order that they arrive to
the queue. Figure 3.6 illustrates the relationships of the elements of the system
with the customers appearing as dark circles.

FIGURE 3.6
Descriptive drawing of the automatic teller machine (ATM) system.

Arriving customers ATM queue ATM server Departing

(entities) (FIFO) (resource) customers
(entities)

8 7 6 5 4 3 2 1

Interarrival time
4.8 minutes

7th customer 6th customer

arrives at arrives at
21.0 min. 16.2 min.
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Our objective in building a spreadsheet simulation model of the ATM system

is to estimate the average amount of time the 25 customers will spend waiting in
the queue and the average amount of time the customers will spend in the system.
To accomplish our objective, the spreadsheet will need to generate random
numbers and random variates, to contain the logic that controls how customers are
processed by the system, and to compute an estimate of system performance mea-
sures. The spreadsheet simulation is shown in Table 3.2 and is divided into three
main sections: Arrivals to ATM, ATM Processing Time, and ATM Simulation
Logic. The Arrivals to ATM and ATM Processing Time provide the foundation for
the simulation, while the ATM Simulation Logic contains the spreadsheet pro-
gramming that mimics customers flowing through the ATM system. The last row
of the Time in Queue column and the Time in System column under the ATM
Simulation Logic section contains one observation of the average time customers
wait in the queue, 1.94 minutes, and one observation of their average time in the
system, 4.26 minutes. The values were computed by averaging the 25 customer
time values in the respective columns.
Do you think customer number 17 (see the Customer Number column)
became upset over having to wait in the queue for 6.11 minutes to conduct a
0.43 minute transaction at the ATM (see the Time in Queue column and the
Service Time column under ATM Simulation Logic)? Has something like this
ever happened to you in real life? Simulation can realistically mimic the behavior
of a system. More time will be spent interpreting the results of our spreadsheet
simulation after we understand how it was put together.

3.5.1 Simulating Random Variates

The interarrival time is the elapsed time between customer arrivals to the ATM.
This time changes according to the exponential distribution with a mean of
3.0 minutes. That is, the time that elapses between one customer arrival and the
next is not the same from one customer to the next but averages out to be 3.0 min-
utes. This is illustrated in Figure 3.6 in that the interarrival time between cus-
tomers 7 and 8 is much smaller than the interarrival time of 4.8 minutes between
customers 6 and 7. The service time at the ATM is also a random variable follow-
ing the exponential distribution and averages 2.4 minutes. To simulate this sto-
chastic system, a random number generator is needed to produce observations
(random variates) from the exponential distribution. The inverse transformation
method was used in Section 3.4.2 just for this purpose.
The transformation equation is
X i = −β ln (1 − Ui ) for i = 1, 2, 3, . . . , 25
where Xi represents the ith value realized from the exponential distribution with
mean β, and Ui is the ith random number drawn from a uniform(0,1) distribution.
The i = 1, 2, 3, . . . , 25 indicates that we will compute 25 values from the transfor-
mation equation. However, we need to have two different versions of this equation
to generate the two sets of 25 exponentially distributed random variates needed to
simulate 25 customers because the mean interarrival time of β # 3.0 minutes is dif-
ferent than the mean service time of β # 2.4 minutes. Let X1i denote the interarrival
 ProModel, Second Edition
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TABLE 3.2 Spreadsheet Simulation of Automatic Teller Machine (ATM)

Arrivals to ATM ATM Processing Time ATM Simulation Logic

Random Interarrival Random Service Customer Arrival Begin Service Service Departure Time in Time in

I. Study Chapters
Stream 1 Number Time Stream 2 Number Time Number Time Time Time Time Queue System
i (Z 1i ) (U 1i ) (X1i ) (Z 2i ) (U 2i ) (X2i ) (1) (2) (3) (4) (5) = (3) + (4) (6) = (3) − (2) (7) = (5) − (2)

0 3 122
1 66 0.516 2.18 5 0.039 0.10 1 2.18 2.18 0.10 2.28 0.00 0.10
2 109 0.852 5.73 108 0.844 4.46 2 7.91 7.91 4.46 12.37 0.00 4.46
3 116 0.906 7.09 95 0.742 3.25 3 15.00 15.00 3.25 18.25 0.00 3.25
4 7 0.055 0.17 78 0.609 2.25 4 15.17 18.25 2.25 20.50 3.08 5.33
5 22 0.172 0.57 105 0.820 4.12 5 15.74 20.50 4.12 24.62 4.76 8.88

3. Simulation Basics
6 81 0.633 3.01 32 0.250 0.69 6 18.75 24.62 0.69 25.31 5.87 6.56
7 40 0.313 1.13 35 0.273 0.77 7 19.88 25.31 0.77 26.08 5.43 6.20
8 75 0.586 2.65 98 0.766 3.49 8 22.53 26.08 3.49 29.57 3.55 7.04
9 42 0.328 1.19 13 0.102 0.26 9 23.72 29.57 0.26 29.83 5.85 6.11
10 117 0.914 7.36 20 0.156 0.41 10 31.08 31.08 0.41 31.49 0.00 0.41
11 28 0.219 0.74 39 0.305 0.87 11 31.82 31.82 0.87 32.69 0.00 0.87
12 79 0.617 2.88 54 0.422 1.32 12 34.70 34.70 1.32 36.02 0.00 1.32
13 126 0.984 12.41 113 0.883 5.15 13 47.11 47.11 5.15 52.26 0.00 5.15
14 89 0.695 3.56 72 0.563 1.99 14 50.67 52.26 1.99 54.25 1.59 3.58
15 80 0.625 2.94 107 0.836 4.34 15 53.61 54.25 4.34 58.59 0.64 4.98
16 19 0.148 0.48 74 0.578 2.07 16 54.09 58.59 2.07 60.66 4.50 6.57
17 18 0.141 0.46 21 0.164 0.43 17 54.55 60.66 0.43 61.09 6.11 6.54
18 125 0.977 11.32 60 0.469 1.52 18 65.87 65.87 1.52 67.39 0.00 1.52
19 68 0.531 2.27 111 0.867 4.84 19 68.14 68.14 4.84 72.98 0.00 4.84
20 23 0.180 0.60 30 0.234 0.64 20 68.74 72.98 0.64 73.62 4.24 4.88
21 102 0.797 4.78 121 0.945 6.96 21 73.52 73.62 6.96 80.58 0.10 7.06
22 97 0.758 4.26 112 0.875 4.99 22 77.78 80.58 4.99 85.57 2.80 7.79

Companies, 2004
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23 120 0.938 8.34 51 0.398 1.22 23 86.12 86.12 1.22 87.34 0.00 1.22
24 91 0.711 3.72 50 0.391 1.19 24 89.84 89.84 1.19 91.03 0.00 1.19
25 122 0.953 9.17 29 0.227 0.62 25 99.01 99.01 0.62 99.63 0.00 0.62
Average 1.94 4.26
61
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time and X2i denote the service time generated for the ith customer simulated in the
system. The equation for transforming a random number into an interarrival time
observation from the exponential distribution with mean β # 3.0 minutes becomes
X1i = −3.0 ln (1 − U 1i ) for i = 1, 2, 3, . . . , 25
where U 1i denotes the ith value drawn from the random number generator using
Stream 1. This equation is used in the Arrivals to ATM section of Table 3.2 under
the Interarrival Time (X1i ) column.
The equation for transforming a random number into an ATM service time ob-
servation from the exponential distribution with mean β # 2.4 minutes becomes
X2i = −2.4 ln (1 − U 2i ) for i = 1, 2, 3, . . . , 25
where U 2i denotes the ith value drawn from the random number generator using
Stream 2. This equation is used in the ATM Processing Time section of Table 3.2
under the Service Time (X2i ) column.
Let’s produce the sequence of U 1i values that feeds the transformation equa-
tion (X1i ) for interarrival times using a linear congruential generator (LCG)
similar to the one used in Table 3.1. The equations are
Z 1i = (21Z 1i−1 + 3) mod(128)
U 1i = Z 1i /128 for i = 1, 2, 3, . . . , 25
The authors defined Stream 1’s starting or seed value to be 3. So we will use
Z 10 = 3 to kick off this stream of 25 random numbers. These equations are used
in the Arrivals to ATM section of Table 3.2 under the Stream 1 (Z 1i ) and Random
Number (U 1i ) columns.
Likewise, we will produce the sequence of U 2i values that feeds the trans-
formation equation (X2i ) for service times using
Z 2i = (21Z 2i−1 + 3) mod(128)
U 2i = Z 2i /128 for i = 1, 2, 3, . . . , 25
and will specify a starting seed value of Z 20 = 122, Stream 2’s seed value, to kick
off the second stream of 25 random numbers. These equations are used in the
ATM Processing Time section of Table 3.2 under the Stream 2 (Z 2i ) and Random
Number (U 2i ) columns.
The spreadsheet presented in Table 3.2 illustrates 25 random variates for both
the interarrival time, column (X1i ), and service time, column (X2i ). All time
values are given in minutes in Table 3.2. To be sure we pull this together correctly,
let’s compute a couple of interarrival times with mean β # 3.0 minutes and
compare them to the values given in Table 3.2.
Given Z 10 = 3
Z 11 = (21Z 10 + 3) mod(128) = (21(3) + 3) mod(128)
= (66) mod(128) = 66
U 11 = Z 11 /128 = 66/128 = 0.516
X11 = −β ln (1 − U 11 ) = −3.0 ln (1 − 0.516) = 2.18 minutes
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Chapter 3 Simulation Basics 63

FIGURE 3.7
Microsoft Excel
snapshot of the ATM
spreadsheet
illustrating the
equations for the
Arrivals to ATM
section.

The value of 2.18 minutes is the first value appearing under the column,
Interarrival Time (X1i ). To compute the next interarrival time value X12 , we start
by using the value of Z 11 to compute Z 12 .
Given Z 11 = 66
Z 12 = (21Z 11 + 3) mod(128) = (21(66) + 3) mod(128) = 109
U 12 = Z 12 /128 = 109/128 = 0.852
X12 = −3 ln (1 − U 12 ) = −3.0 ln (1 − 0.852) = 5.73 minutes
Figure 3.7 illustrates how the equations were programmed in Microsoft Excel for
the Arrivals to ATM section of the spreadsheet. Note that the U 1i and X1i values
in Table 3.2 are rounded to three and two places to the right of the decimal,
respectively. The same rounding rule is used for U 2i and X2i .
It would be useful for you to verify a few of the service time values with
mean β # 2.4 minutes appearing in Table 3.2 using
Z 20 = 122
Z 2i = (21Z 2i−1 + 3) mod(128)
U 2i = Z 2i /128
X2i = −2.4 ln (1 − U 2i ) for i = 1, 2, 3, . . .
The equations started out looking a little difficult to manipulate but turned out
not to be so bad when we put some numbers in them and organized them in a
spreadsheet—though it was a bit tedious. The important thing to note here is that
although it is transparent to the user, ProModel uses a very similar method to
produce exponentially distributed random variates, and you now understand how
it is done.
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The LCG just given has a maximum cycle length of 128 random numbers
(you may want to verify this), which is more than enough to generate 25 interar-
rival time values and 25 service time values for this simulation. However, it is a
poor random number generator compared to the one used by ProModel. It was
chosen because it is easy to program into a spreadsheet and to compute by hand to
facilitate our understanding. The biggest difference between it and the random
number generator in ProModel is that the ProModel random number generator
manipulates much larger numbers to pump out a much longer stream of numbers
that pass all statistical tests for randomness.
Before moving on, let’s take a look at why we chose Z 10 = 3 and Z 20 = 122.
Our goal was to make sure that we did not use the same uniform(0,1) random
number to generate both an interarrival time and a service time. If you look
carefully at Table 3.2, you will notice that the seed value Z 20 = 122 is the Z 125
value from random number Stream 1. Stream 2 was merely defined to start where
Stream 1 ended. Thus our spreadsheet used a unique random number to generate
each interarrival and service time. Now let’s add the necessary logic to our
spreadsheet to conduct the simulation of the ATM system.

3.5.2 Simulating Dynamic, Stochastic Systems

The heart of the simulation is the generation of the random variates that drive the
stochastic events in the simulation. However, the random variates are simply a list
of numbers at this point. The spreadsheet section labeled ATM Simulation Logic
in Table 3.2 is programmed to coordinate the execution of the events to mimic the
processing of customers through the ATM system. The simulation program must
keep up with the passage of time to coordinate the events. The word dynamic
appearing in the title for this section refers to the fact that the simulation tracks the
passage of time.
The first column under the ATM Simulation Logic section of Table 3.2,
labeled Customer Number, is simply to keep a record of the order in which the
25 customers are processed, which is FIFO. The numbers appearing in parenthe-
ses under each column heading are used to illustrate how different columns are
added or subtracted to compute the values appearing in the simulation.
The Arrival Time column denotes the moment in time at which each customer
arrives to the ATM system. The first customer arrives to the system at time 2.18
minutes. This is the first interarrival time value (X11 = 2.18) appearing in the
Arrival to ATM section of the spreadsheet table. The second customer arrives to the
system at time 7.91 minutes. This is computed by taking the arrival time of the first
customer of 2.18 minutes and adding to it the next interarrival time of X12 = 5.73
minutes that was generated in the Arrival to ATM section of the spreadsheet table.
The arrival time of the second customer is 2.18 + 5.73 # 7.91 minutes. The
process continues with the third customer arriving at 7.91 + 7.09 # 15.00 minutes.
The trickiest piece to program into the spreadsheet is the part that determines
the moment in time at which customers begin service at the ATM after waiting in
the queue. Therefore, we will skip over the Begin Service Time column for now
and come back to it after we understand how the other columns are computed.
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The Service Time column simply records the simulated amount of time
required for the customer to complete their transaction at the ATM. These values
are copies of the service time X2i values generated in the ATM Processing Time
section of the spreadsheet.
The Departure Time column records the moment in time at which a customer
departs the system after completing their transaction at the ATM. To compute the
time at which a customer departs the system, we take the time at which the cus-
tomer gained access to the ATM to begin service, column (3), and add to that the
length of time the service required, column (4). For example, the first customer
gained access to the ATM to begin service at 2.18 minutes, column (3). The ser-
vice time for the customer was determined to be 0.10 minutes in column (4). So,
the customer departs 0.10 minutes later or at time 2.18 + 0.10 # 2.28 minutes.
This customer’s short service time must be because they forgot their PIN number
and could not conduct their transaction.
The Time in Queue column records how long a customer waits in the queue
before gaining access to the ATM. To compute the time spent in the queue, we
take the time at which the ATM began serving the customer, column (3), and sub-
tract from that the time at which the customer arrived to the system, column (2).
The fourth customer arrives to the system at time 15.17 and begins getting service
from the ATM at 18.25 minutes; thus, the fourth customer’s time in the queue is
18.25 − 15.17 # 3.08 minutes.
The Time in System column records how long a customer was in the system.
To compute the time spent in the system, we subtract the customer’s departure
time, column (5), from the customer’s arrival time, column (2). The fifth customer
arrives to the system at 15.74 minutes and departs the system at 24.62 minutes.
Therefore, this customer spent 24.62 − 15.74 # 8.88 minutes in the system.
Now let’s go back to the Begin Service Time column, which records the time
at which a customer begins to be served by the ATM. The very first customer to
arrive to the system when it opens for service advances directly to the ATM. There
is no waiting time in the queue; thus the value recorded for the time that the first
customer begins service at the ATM is the customer’s arrival time. With the
exception of the first customer to arrive to the system, we have to capture the logic
that a customer cannot begin service at the ATM until the previous customer using
the ATM completes his or her transaction. One way to do this is with an IF state-
ment as follows:

IF (Current Customer's Arrival Time < Previous Customer's

Departure Time)
THEN (Current Customer's Begin Service Time = Previous Customer's
Departure Time)
ELSE (Current Customer's Begin Service Time = Current Customer's
Arrival Time)

Figure 3.8 illustrates how the IF statement was programmed in Microsoft

Excel. The format of the Excel IF statement is

IF (logical test, use this value if test is true, else use this
value if test is false)
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FIGURE 3.8
Microsoft Excel
snapshot of the ATM
spreadsheet
illustrating the IF
statement for the
Begin Service Time
column.

The Excel spreadsheet cell L10 (column L, row 10) in Figure 3.8 is the Begin
Service Time for the second customer to arrive to the system and is programmed
with IF(K10<N9,N9,K10). Since the second customer’s arrival time (Excel cell
K10) is not less than the first customer’s departure time (Excel cell N9), the logical
test evaluates to “false” and the second customer’s time to begin service is set to his
or her arrival time (Excel cell K10). The fourth customer shown in Figure 3.8 pro-
vides an example of when the logical test evaluates to “true,” which results in the
fourth customer beginning service when the third customer departs the ATM.

3.5.3 Simulation Replications and Output Analysis

The spreadsheet model makes a nice simulation of the first 25 customers to arrive
to the ATM system. And we have a simulation output observation of 1.94 minutes
that could be used as an estimate for the average time that the 25 customers waited
in the queue (see the last value under the Time in Queue column, which represents
the average of the 25 individual customer queue times). We also have a simulation
output observation of 4.26 minutes that could be used as an estimate for the
average time the 25 customers were in the system. These results represent only
one possible value of each performance measure. Why? If at least one input vari-
able to the simulation model is random, then the output of the simulation model
will also be random. The interarrival times of customers to the ATM system and
their service times are random variables. Thus the output of the simulation model
of the ATM system is also a random variable. Before we bet that the average time
customers spend in the system each day is 4.26 minutes, we may want to run the
simulation model again with a new sample of interarrival times and service times
to see what happens. This would be analogous to going to the real ATM on a sec-
ond day to replicate our observing the first 25 customers processed to compute a
second observation of the average time that the 25 customers spend in the system.
In simulation, we can accomplish this by changing the values of the seed numbers
used for our random number generator.
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TABLE 3.3 Summary of ATM System Simulation Output

Replication Average Time in Queue Average Time in System

1 1.94 minutes 4.26 minutes

2 0.84 minutes 2.36 minutes
Average 1.39 minutes 3.31 minutes

Changing the seed values Z 10 and Z 20 causes the spreadsheet program to

recompute all values in the spreadsheet. When we change the seed values Z 10 and
Z 20 appropriately, we produce another replication of the simulation. When we run
replications of the simulation, we are driving the simulation with a set of random
numbers never used by the simulation before. This is analogous to the fact that the ar-
rival pattern of customers to the real ATM and their transaction times at the ATM will
not likely be the same from one day to the next. If Z 10 = 29 and Z 20 = 92 are used
to start the random number generator for the ATM simulation model, a new replica-
tion of the simulation will be computed that produces an average time in queue of
0.84 minutes and an average time in system of 2.36 minutes. Review question num-
ber eight at the end of the chapter which asks you to verify this second replication.
Table 3.3 contains the results from the two replications. Obviously, the results
from this second replication are very different than those produced by the first
replication. Good thing we did not make bets on how much time customers spend
in the system based on the output of the simulation for the first replication only. Sta-
tistically speaking, we should get a better estimate of the average time customers
spend in queue and the average time they are in the system if we combine the results
from the two replications into an overall average. Doing so yields an estimate of
1.39 minutes for the average time in queue and an estimate of 3.31 minutes for the
average time in system (see Table 3.3). However, the large variation in the output
of the two simulation replications indicates that more replications are needed to get
reasonably accurate estimates. How many replications are enough? You will know
how to answer the question upon completing Chapter 9.
While spreadsheet technology is effective for conducting Monte Carlo simu-
lations and simulations of simple dynamic systems, it is ineffective and inefficient
as a simulation tool for complex systems. Discrete-event simulation software
technology was designed especially for mimicking the behavior of complex sys-
tems and is the subject of Chapter 4.

3.6 Summary
Modeling random behavior begins with transforming the output produced by a
random number generator into observations (random variates) from an appropri-
ate statistical distribution. The values of the random variates are combined with
logical operators in a computer program to compute output that mimics the per-
formance behavior of stochastic systems. Performance estimates for stochastic
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simulations are obtained by calculating the average value of the performance

metric across several replications of the simulation. Models can realistically
simulate a variety of systems.

3.7 Review Questions

1. What is the difference between a stochastic model and a deterministic
model in terms of the input variables and the way results are interpreted?
2. Give a statistical description of the numbers produced by a random
number generator.
3. What are the two statistical properties that random numbers must
satisfy?
4. Given these two LCGs:
Zi = (9Z i−1 + 3) mod(32)
Zi = (12Z i−1 + 5) mod(32)
a. Which LCG will achieve its maximum cycle length? Answer the
question without computing any Z i values.
b. Compute Z1 through Z5 from a seed of 29 (Z0 = 29) for the
second LCG.
5. What is a random variate, and how are random variates generated?
6. Apply the inverse transformation method to generate three variates from
the following distributions using U1 = 0.10, U2 = 0.53, and U3 = 0.15.
a. Probability density function:

⎨ 1
⎧
for α ≤ x ≤ β
f (x) = β − α
0 elsewhere
⎩

where β = 7 and α = 4.
b. Probability mass function:

⎨ x
⎧
for x = 1, 2, 3, 4, 5
p(x) = P(X = x) = 15
0 elsewhere
⎩

7. How would a random number generator be used to simulate a 12 percent

chance of rejecting a part because it is defective?
8. Reproduce the spreadsheet simulation of the ATM system presented
in Section 3.5. Set the random numbers seeds Z 10 = 29 and Z 20 = 92
to compute the average time customers spend in the queue and in the
system.
a. Verify that the average time customers spend in the queue and in the
system match the values given for the second replication in Table 3.3.
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Chapter 3 Simulation Basics 69

b. Verify that the resulting random number Stream 1 and random

number Stream 2 are completely different than the corresponding
streams in Table 3.2. Is this a requirement for a new replication of
the simulation?

References
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Law, Averill M., and David W. Kelton. Simulation Modeling and Analysis. New York:
McGraw-Hill, 2000.
L’Ecuyer, P. “Random Number Generation.” In Handbook of Simulation: Principles,
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Pooch, Udo W., and James A. Wall. Discrete Event Simulation: A Practical Approach.
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Shannon, Robert E. System Simulation: The Art and Science. Englewood Cliffs, NJ:
Prentice Hall, 1975.
Thesen, Arne, and Laurel E. Travis. Simulation for Decision Making. Minneapolis, MN:
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Widman, Lawrence E.; Kenneth A. Loparo; and Norman R. Nielsen. Artificial Intelligence,
Simulation, and Modeling. New York: John Wiley & Sons, 1989.