SIMULATION

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SIMULATION PART 1

INTRODUCTION
N E E D FOR SIMULATION
SOME E X A M P L E S O F SIMULATION MODE LS
DEFINITION OF SIMULATION
T Y P E S O F SIMULATION
ME THODOL OG Y OF SIMULATION
ADVANTAGES OF SIMULATION
LIMITATION OF SIMULATION
PHASES OF SIMULATION MODE L
WHEN T O USE SIMULATION
GENERATION OF RANDOM NUMBER
MONTE -CARLO ME THOD OF SIMULATION
APPLICATION OF SIMULATION
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DEFINITIONS OF SIMULATION

SIMULATION
Definition
According to Shannon A Simulation is the process of designing a model of a
real system and conducting experiments with this model for the purpose of
understanding the behaviour for the operation of the system.

Definition
According to Donald G.Malcolm A simulated model may bedefined as one
which depicts the working of a large-scale system of men, machine, materials
and information operating over a period of time in a simulated environment of
the actual real world conditions.

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Simulation in Management Science
Simulation is a powerful and widely used management science
technique for analysis and study of complex problems. It is one of the
most widely used quantitative approaches to decision making.
Simulation analysis is a natural and logical extension of the analytical
and mathematical techniques used for solving problems in Operations
Research. Simulation, which can be called management laboratory,
determines the effect of alternate policies without disturbing the real
system.
The representation of reality is some physical form or in some form
mathematical equations may be called Simulation that it is Simulation
is an imitation of reality.
The basic idea of Simulation is to build an experiment device that
will act like (simulate) the system of interest in certain important
aspects.
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Simulation in practice

Simulation enables the successful use of organizational

improvement programs such as Six Sigma. The activities
of define, measure, analyze, improve and control depend
on the earnest participation of everyone involved to
manage quality. In particular, the last three (analyze,
improve and control) revolve around identification of root
causes, coming up with new policies and practices,and
putting controls in place to keep quality high. Clearly,
simulation can play the important role of reducing the risk
of change and managing change.

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NEED FOR SIMULATION
Using Simulation, an analyst can introduce the constants and variable related
to the problem, set-up the possible courses of action and establish criteria
which act as measures of effectiveness. The major reasons for applying
simulation technique to O.R. problem may be listed as below:
Simulation is an appropriate tool to use in solving a problem when
experimenting on the real system (a) would be disruptive, (b) would be
too expensive, (c) does not permit replication event (d) does not permit
control over key variables.
Simulation is a desirable tool to use in solving business problem when a
mathematical model (a) is too complex to solve, (b) is beyond the
capacity of available personnel, (c) is not detailed enough to provide
information on all importance decision variable.
Simulation provides a trial-and -error movement towards the optimal
solution. The decision-maker selects an alternative, experience the effect
of the selection, and then improves the selection. In this way, the
selection is adjusted until it approximates the optimal solution.
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SOME EXAMPLES OF SIMULATION MODELS
The Trading Gameis a group business simulation designed to get students
thinking about and experiencing a wide range of entrepreneurial skills and
activities.
T h e T r a d i n g Game is a group business simulation designed to get
students thinking about and experiencing a wide range of entrepreneurial
skills and activities.
Plan etar iu m A model representing the planetary system projecting the
images and motion of celestial object like stars, planets, and
constellations.
C h i l d r e n cycling par k with various crossings and signals is a simulated
model of the city traffic system.
Ch ess It is a non-probabilistic simulation of a fight between black and
white armies.
T V Games: The combination of computing and simulation has resulted
in the production of T V games.
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SOME EXAMPLES OF SIMULATION MODELS

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SOME EXAMPLES OF SIMULATION MODELS

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SOME EXAMPLES OF SIMULATION MODELS

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SOME EXAMPLES OF SIMULATION MODELS

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SOME EXAMPLES OF SIMULATION MODELS

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TYPES OF SIMULATION
Simulation are of two types. Namely 1. Analogue or
Environmental Simulation and 2.Computer or System
Simulation
Analogue simulation is one which simulates the reality in
physical form. Some of the examples are Children cycling
park, Planetarium,Chess.
Computer or System Simulation is a numerical technique
involving mathematical and logical relationship using
digital computer for conducting experiment which involve
complex real world system and intricate problem of
managerial decision making where analogue type cannot
be implemented.

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CLASSIFICATION OF SIMULATION MODELS

Simulation models can be classified into the following four categories:

1.Simulation of Deterministic Models. In the case of these models,
the input and output variables are not permitted to be random variable
and models are described by exact functional relationship.
2.Simulation of Probabilistic Models. In such cases, method of
random sampling is used. The technique used for solving these models is
termed as M on te -Car lo Technique.
3.Simulation of Static Models These models do not take variable time
into consideration.
4.Simulation of D y n a m i c Models These models deal with
time-varying interaction.

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METHODOLOGY OF SIMULATION
The following seven steps are involved in Simulation process.
1. Identity and clearly define the problem.
2. List the statement of objectives of the problem.
3.Formulate the variables that influence the situation and an exact or
probabilistic description of their possible values or states.
4.Obtain a consistent set of values or states for the variables, that is, a
sample of what could happen. In the case of deterministic variables, this
is simple and in case of probabilistic variables, random sampling
technique may be used.
5.Use the sample obtained in step 2 to calculate the value of the decision
criterion, by actually following the relationships among the variables for
each of the alternatives decisions.
6. Repeat steps 2 and 3 until a sufficient number of samples are available.
7.Tabulate the various values of the decision criterion and choose the
best policy.
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WHEN TO USE SIMULATION

Simulation may be used especially when

1. The problem is susceptible to description by a
mathematical model but the analysis of the model is
beyond the level of mathematical sophistication of
the analyst.
2. The problem is not susceptible to description by a
mathematical model.

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ADVANTAGES OF SIMULATION

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ADVANTAGES OF SIMULATION

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DISADVANTAGES OF SIMULATION

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APPLICATION OF SIMULATION

There is a wide range of applications of computer-based simulation models

because it is an approach rather than an application of specific techniques.
The major use of computer-based Monte-Carlo simulation model has been in
the solution of complex problems. Some of the major application are:
Queuing problems.
Inventory problems.
Prodution Scheduling.
Network problems ( P E R T ) .
Job Sequencing.
Capital budgeting and investment problems.

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APPLICATION OF SIMULATION

Military studies of logistics, support planning and weapon system and

effectiveness.
Sales Forecasting
Financial studies involving risks investment.
Testing of decision rules for hospital admission and operating policies.
Traffic light timing.
Voting Patterns prediction

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SIMULATION PART 2

• Process of simulation
• Monte Carlo Simulation
• Simulation Case
• Simulation of Inventory Analysis
• Using Software in Simulation
Simulation Models

Simulation Model

Monte
Operational Systems
Carlo
Gaming Simulation
Simulation

Situation About Large

involving competitions systems
probability –involve 2 or
or chance more players
Operational Gaming
Systems Simulation
Systems simulation
Econometric simulation Model:
THE PROCESS OF SIMULATION
Verification and Validation
MONTE-CARLO METHOD OF SIMULATION

The Monte-Carlo method is a simulation technique in which statistical

distribution function are created by using a series of random numbers.This
approach has the ability to develop many months or years of data in a matter
of a few minutes on a digital computer. The method is generally used to solve
problems which cannot be adequately represented by the mathematical
models, or, where solution of the models is not possible by analytical methods.
This method yields a solution which should be very close to the optimal but
not necessarily the exact solution.

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GENERATION OF RANDOM NUMBERS

Random numbers play a vital role in simulation models. Random numbers

may be drawn from random number table stored in the memory of the
computer. A simulation model need not be a deterministic and may include
some elements of uncertainty. The problem concerned with probabilistic in
simulation, is based on the use of random numbers. These random numbers
which have equal probability of being generated. For example,when we are
interested in one digit number 0, 1, 2, , , , , , 9 , there are in all ten numbers and
each of the numbers should have probability of being generated. There are
several methods for the generation of random numbers, the most common
among these are the ”Mid-square”, ” Spinning arrow method” ”Dice rolling
method.

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MONTE CARLO SIMULATION -STEPS
Simulation Example -Harry’s Auto
Harry’s Auto Example
Harry’s Auto Example
Probability of Demand
Harry’s Auto Example

Figure F.1
Harry’s Auto Example

Figure F.1
Assignment of Random Numbers for
Harry’s Auto
Harry’s Auto Example
Table of Random Numbers
Harry’s Auto Example

Table F.4

Table F.3
Harry’s Auto Example
Harry’s Auto Example
Simulation Profit Example
Leonard Presby’s newsstand uses naive forecasting to order tomorrow’s papers. The
number of newspapers ordered corresponds to the previous day’s demands. Today’s
demand for papers was 22. Presby buys the newspapers for $0.20 and sells them for
$0.50. Whenever there is unsatisfied demand, Presby estimates the lost goodwill cost
at $0.10. Complete the accompanying table, and answer the questions that follow. a)
What is the demand on day 3?
b) What is the total net profit at the end of the 6 days?
c) What is the lost goodwill on day 6?
d) What is the net profit on day 2?
e) How many papers has Presby ordered for day 5?
Solution

Day Papers Ordered Random Number Demand Revenue Cost Goodwill Cost Net Profit
1 22 37 22 11 4.4 0 6.6
2 22 19 21 10.5 4.4 0 6.1
3 21 52 24 10.5 4.2 0.3 6
4 24 8 21 10.5 4.8 0 5.7
5 21 22 21 10.5 4.2 0 6.3
6 21 61 24 10.5 4.2 0.3 6
36.7

(a) 24
(b) $36.70
(c) $0.30
(d) $6.10
(e) 21
Practice Quiz
Every home football game for the past 8 years at Southwestern University has been sold
out. The revenues from ticket sales are significant, but the sale of food, beverages, and
souvenirs has contributed greatly to the overall profitability of the football program.
One particular souvenir is the football program for each game. The number of programs
sold at each game is described by the probability distribution given in the following
table. Each program costs $0.80 to produce and sells for $2.00. Any programs that are
not sold are donated to a recycling center and do not produce any revenue. a) Simulate
the sales of programs at 10 football games. Use the last column in the random-number
table (Table F.4 on slide 62) and begin at the top of the column. b) If the university
decided to print 2,500 programs for each game, what would the average profits be for
the 10 games that were simulated? c) If the university decided to print 2,600 programs
for each game, what would the average profits be for the 10 games that were
simulated?
Simulation and Inventory Analysis
Simkin’s Hardware Store
Probabilities and Random Numbers for demand and lead time

Lead Time
Inventory Simulation
Using table of random numbers, the simulation is
conducted using a four step process:
Inventory Simulation  For the random numbers and
sequence refer to Table F.4
Analysing Simkin’s Inventory Cost

 The objective is to find a low cost solution so Simkin

must determine what the costs are
 Equations for average daily ending inventory, average
lost sales, and average number of orders placed:
Analyzing Simkin’s Inventory Costs
 Simkin’s store is open 200 days a year
 Estimated ordering cost is $10 per order
 Holding cost is $6 per drill per year
 Lost sale cost is $8
Inventory Simulation Quiz
Dumoor Appliance Center sells and services several brands of major appliances. Past
sales for a particular model of refrigerator have resulted in the following probability
distribution for demand:

The lead-time in weeks is described by the following distribution:

Based on cost considerations as well as storage space, the company has decided to
order 10 of these each time an order is placed. The holding cost is $1 per week for
each unit that is left in inventory at the end of the week. The stockout cost has been
set at $40 per stockout. The company has decided to place an order whenever there
are only two refrigerators left at the end of the week. Simulate 10 weeks of operation
for Dumoor Appliance, assuming that there are currently 5 units in inventory.
Determine what the weekly stockout cost and weekly holding cost would be for the
problem. Use the random numbers in the first column of Table F.4 for demand and
the second column for lead time.
Random Number Table
Role of Computer in Simulation
Using Software in Computer Simulation
Differences between Simulation and Optimization