Chapter 15

Simulation Modeling

To accompany Quantitative Analysis

for Management, 8e
by Render/Stair/Hanna

15-1

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
To accompany Quantitative Analysis
for Management, 8e
by Render/Stair/Hanna

15-2

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

To accompany Quantitative Analysis

for Management, 8e
by Render/Stair/Hanna

15-3

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

To accompany Quantitative Analysis

for Management, 8e
by Render/Stair/Hanna

15-4

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, realworld 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

To accompany Quantitative Analysis

for Management, 8e
by Render/Stair/Hanna

15-5

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

To accompany Quantitative Analysis

for Management, 8e
by Render/Stair/Hanna

15-6

2003 by Prentice Hall, Inc.

Upper Saddle River, NJ 07458

Simulation Models
Categories
Monte Carlo
Operational Gaming
Systems Simulation

To accompany Quantitative Analysis

for Management, 8e
by Render/Stair/Hanna

15-7

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

To accompany Quantitative Analysis

for Management, 8e
by Render/Stair/Hanna

15-8

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

To accompany Quantitative Analysis

for Management, 8e
by Render/Stair/Hanna

15-9

2003 by Prentice Hall, Inc.

Upper Saddle River, NJ 07458

Harrys Auto Tire

p(X)

Demand Probability
1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
0

X
To accompany Quantitative Analysis
for Management, 8e
by Render/Stair/Hanna

15-10

2003 by Prentice Hall, Inc.

Upper Saddle River, NJ 07458

Harrys Auto Tire

P(X)

Demand Cumulative Probability

1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
0

X
To accompany Quantitative Analysis
for Management, 8e
by Render/Stair/Hanna

15-11

2003 by Prentice Hall, Inc.

Upper Saddle River, NJ 07458

Demand

Frequency

Probability

Cumulative
Probability

Random
Number
Interval

Harrys Auto Tire

0
1

10
20

0.05
0.10

0.05
0.15

01 - 05
06 - 15

40

0.20

0.35

16 - 35

60

0.30

0.65

36 - 65

40

0.20

0.85

66 - 85

30

0.15

1.00

86 - 00

To accompany Quantitative Analysis

for Management, 8e
by Render/Stair/Hanna

15-12

2003 by Prentice Hall, Inc.

Upper Saddle River, NJ 07458

Random Number Table

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 88
28 02
68 28
36 49
90 36
62 87
27 21
50 95
18 50
36 24
61 18
21 62
46 32
01 78
14 74
82 82
87 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

To accompany Quantitative Analysis

for Management, 8e
by Render/Stair/Hanna

10
24
03
32
23
59
95
34
34
51
08
48
66
97
03
96
46

47
03
11
10
67
23
89
62
56
74
54
31
62
37
33
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

15-13

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

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
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

2003 by Prentice Hall, Inc.

Upper Saddle River, NJ 07458

07
60
77
49
76
95
51
16
14
85
59
85
40
42
52
39
73

Cumulative
Probability

Random Number
Interval

0.05

0.05

01 - 05

0.06

0.11

06 - 11

16

0.16

0.27

12 - 27

33

0.33

0.60

28 - 60

21

0.21

0.81

81 - 81

19

0.19

1.00

82 - 00

Number of Times
Observed

Probability

Time Between
Breakdowns (Hours)

Three Hills Power

Generator Breakdown
Times

To accompany Quantitative Analysis

for Management, 8e
by Render/Stair/Hanna

15-14

2003 by Prentice Hall, Inc.

Upper Saddle River, NJ 07458

Probability

28

0.28

0.28

01 - 28

52

0.52

0.80

29 - 80

20

0.20

1.00

81 - 00

To accompany Quantitative Analysis

for Management, 8e
by Render/Stair/Hanna

15-15

Random
Number
Interval

Number of Times
Observed

Cumulative
Probability

Repair Time
Required (Hours)

Three Hills Power

Generator Repair
Times

2003 by Prentice Hall, Inc.

Upper Saddle River, NJ 07458

Operational Gaming
Simulation involving competing
players
Examples:
Military games
Business games

To accompany Quantitative Analysis

for Management, 8e
by Render/Stair/Hanna

15-16

2003 by Prentice Hall, Inc.

Upper Saddle River, NJ 07458

Systems Simulation
Large, dynamic systems
Examples:
Corporate operating system
Urban government
Economic systems

To accompany Quantitative Analysis

for Management, 8e
by Render/Stair/Hanna

15-17

2003 by Prentice Hall, Inc.

Upper Saddle River, NJ 07458

15-18

GNP
Inflation Rates
Unemployment Rates
Monetary Supplies
Population Growth Rates

c
l
mi de
no M o

To accompany Quantitative Analysis

for Management, 8e
by Render/Stair/Hanna

o
Ec

Income Tax Levels

Corporate Tax Rates
Interest Rates
Government Spending
Foreign Trade Policy

Inputs/Outputs of an
Economic Model

2003 by Prentice Hall, Inc.

Upper Saddle River, NJ 07458