Chapter 13 Supplement

Simulation
Operations Management - 6th Edition

R b t R
Roberta Russell
ll & B
Bernard
dWW. Taylor,
T l III

Beni Asllani
Copyright 2009 John Wiley & Sons, Inc University of Tennessee at Chattanooga

Lecture Outline

Š Monte Carlo Simulation

Š Computer Simulation with Excel
Š Areas of Simulation Application

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 Simulation

Š Mathematical and computer modeling technique for

replicating real-world problem situations
Š Modeling approach primarily used to analyze
probabilistic problems
„ It does not normally provide a solution; instead it provides
information that is used to make a decision
Š Physical simulation
„ Space flights, wind tunnels, treadmills for tires
Š Mathematical-computerized simulation
„ Computer-based replicated models

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Monte Carlo Simulation

ƒ Select numbers randomly from a
probability distribution
ƒ Use these values to observe how a
model performs over time
ƒ Random numbers each have an equal q
likelihood of being selected at random

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 Distribution of Demand

LAPTOPS DEMANDED FREQUENCY OF PROBABILITY OF

PER WEEK, x DEMAND DEMAND, P(x)
0 20 0.20
1 40 0.40
2 20 0.20
3 10 0.10
4 10 0 10
0.10
100 1.00

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Roulette Wheel of Demand

0
90
x=4
x=0
80 x=3 20

x=2

x=1

60

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 Generating Demand
from Random Numbers

DEMAND, RANGES OF RANDOM NUMBERS,

x r
0 0-19
1 20
20--59 r = 39
2 60--79
60
3 80
80--89
4 90
90--99

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Random Number Table

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 15 Weeks of Demand
WEEK r DEMAND (x
(x) REVENUE (S)
1 39 1 4,300
2 73 2 8,600
3 72 2 8 600
8,600
4 75 2 8,600
5 37 1 4,300
6 02 0 0
7 87 3 12,900
8 98 4 17,200
9 10 0 0
10 47 1 4,300
11 93 4 17,200
,
12 21 1 4,300 Average demand
13 95 4 17,200 = 31/15
14 97 4 17,200 = 2.07 laptops/week
15 69 2 8,600
Σ = 31 $133,300

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Computing Expected Demand

E(x) = (0.20)(0)
(0 20)(0) + (0
(0.40)(1)
40)(1) + (0
(0.20)(2)
20)(2)
+ (0.10)(3) + (0.10)(4)
= 1.5 laptops per week

•Difference between 1.5 and 2.07 is due to small

number of periods analyzed (only 15 weeks)

•Steady-state result
•an average result that remains constant after
enough trials

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 Random Numbers in Excel

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Simulation in Excel

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 Simulation in Excel (cont.)

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Decision Making with

Simulation

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 Decision Making with
Simulation (cont.)

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Areas of Simulation Application

Š Waiting Lines/Service
„ Complex systems for which it is difficult to develop
analytical formulas
„ Determine how many registers and servers are
needed to meet customer demand
Š Inventory Management
„ Traditional models make the assumption that
customer demand is certain
„ Simulation is widely used to analyze JIT without
having to implement it physically

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 Areas of Simulation
Application (cont.)

Š Production and Manufacturing Systems

„ Examples: production scheduling, production sequencing,
assembly line balancing, plant layout, and plant location
analysis
„ Machine breakdowns typically occur according to some
probability distributions
Š Capital Investment and Budgeting
„ Capital budgeting problems require estimates of cash flows,
flows
often resulting from many random variables
„ Simulation has been used to generate values of cash flows,
market size, selling price, growth rate, and market share

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Areas of Simulation Application

(cont.)
Š Logistics
L i ti
„ Typically include numerous random variables, such as
distance, different modes of transport, shipping rates, and
schedules to analyze different distribution channels
Š Service Operations
„ Examples: police departments, fire departments, post offices,
hospitals, court systems, airports
„ Complex operations that no technique except simulation can
b employed
be l d
Š Environmental and Resource Analysis
„ Examples: impact of manufacturing plants, waste-disposal
facilities, nuclear power plants, waste and population
conditions, feasibility of alternative energy sources

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