Operations
Management
Module F –
Simulation
PowerPoint presentation to accompany
Heizer/Render
Principles of Operations Management, 7e
Operations Management, 9e
Outline
What Is Simulation?
Advantages and Disadvantages of
Simulation
Monte Carlo Simulation
Simulation of A Queuing Problem
Simulation and Inventory Analysis
Learning Objectives
When you complete this module you should
be able to:
List the advantages and disadvantages of
modeling with simulation
Perform the five steps in a Monte Carlo
simulation
Simulate a queuing problem
Simulate an inventory problem
Use Excel spreadsheets to create a simulation
What is Simulation?
An attempt to duplicate the features,
appearance, and characteristics of a real
system
1. To imitate a real-world situation
mathematically
2. To study its properties and operating
characteristics
3. To draw conclusions and make action
decisions based on the results of the
simulation
Computer Analysis
Simulation Applications
Ambulance location and Bus scheduling
dispatching Design of library operations
Assembly-line balancing Taxi, truck, and railroad
Parking lot and harbor design dispatching
Distribution system design Production facility scheduling
Scheduling aircraft Plant layout
Labor-hiring decisions Capital investments
Personnel scheduling Production scheduling
Traffic-light timing Sales forecasting
Voting pattern prediction Inventory planning and control
Table F.1
Define problem
The
Introduce variables
Process of
Simulation Construct model
Specify values
of variables
Conduct simulation
Examine results
Select best course
Figure F.1
Advantages of Simulation
1. Relatively straightforward and flexible
2. Can be used to analyze large and complex
real-world situations that cannot be solved by
conventional models
3. Real-world complications can be included
that most OM models cannot permit
4. “Time compression” is possible
Advantages of Simulation
5. Allows “what-if” types of questions
6. Does not interfere with real-world systems
7. Can study the interactive effects of individual
components or variables in order to
determine which ones are important
Disadvantages of Simulation
1. Can be very expensive and may take months
to develop
2. It is a trial-and-error approach that may
produce different solutions in repeated runs
3. Managers must generate all of the conditions
and constraints for solutions they want to
examine
4. Each simulation model is unique
Monte Carlo Simulation
The Monte Carlo method may be used
when the model contains elements that
exhibit chance in their behavior
1. Set up probability distributions for important variables
2. Build a cumulative probability distribution for each variable
3. Establish an interval of random numbers for each variable
4. Generate random numbers
5. Simulate a series of trials
Probability of Demand
(1) (2) (3) (4)
Demand Probability of Cumulative
for Tires Frequency Occurrence Probability
0 10 10/200 = .05 .05
1 20 20/200 = .10 .15
2 40 40/200 = .20 .35
3 60 60/200 = .30 .65
4 40 40/200 = .20 .85
5 30 30/ 200 = .15 1.00
200 days 200/200 = 1.00
Table F.2
Assignment of Random Numbers
Interval of
Daily Cumulative Random
Demand Probability Probability Numbers
0 .05 .05 01 through 05
1 .10 .15 06 through 15
2 .20 .35 16 through 35
3 .30 .65 36 through 65
4 .20 .85 66 through 85
5 .15 1.00 86 through 00
Table F.3
Table of Random Numbers
52 50 60 52 05
37 27 80 69 34
82 45 53 33 55
69 81 69 32 09
98 66 37 30 77
96 74 06 48 08
33 30 63 88 45
50 59 57 14 84
88 67 02 02 84
90 60 94 83 77
Table F.4
Simulation Example 1
Day Random Simulated
Number Number Daily Demand
1 52 3
2 37 3
3 82 4 Select random
4 69 4 numbers from Table F.3
5 98 5
6 96 5
7 33 2
8 50 3
9 88 5
10 90 5
39 Total
3.9 Average
Simulation Example 1
Day Random Simulated
Number Number Daily Demand
1 52 5 3
Expected
2 demand ∑
= 37 (probability of i units)
3 x (demand of i units)
3 82 i =1 4
4 = 69(.05)(0) + (.10)(1) + (.20)(2)
4 + (.30)(3) + (.20)(4) +
(.15)(5)
5 98 5
= 0 + .1 + .4 + .9 + .8 + .75
6 96 5
= 2.95 tires
7 33 2
8 50 3
9 88 5
10 90 5
39 Total
3.9 Average
Queuing Simulation
Overnight barge arrival rates
Table F.5
Number Cumulative Random-Number
of Arrivals Probability Probability Interval
0 .13 .13 01 through 13
1 .17 .30 14 through 30
2 .15 .45 31 through 45
3 .25 .70 46 through 70
4 .20 .90 71 through 90
5 .10 1.00 91 through 00
1.00
Queuing Simulation
Barge unloading rates
Table F.6
Daily
Unloading Cumulative Random-Number
Rates Probability Probability Interval
1 .05 .05 01 through 05
2 .15 .20 06 through 20
3 .50 .70 21 through 70
4 .20 .90 71 through 90
5 .10 1.00 91 through 00
1.00
Queuing Simulation
(1) (2) (3) (4) (5) (6) (7)
Number Number Total
Delayed from Random of Nightly to Be Random Number
Day Previous Day Number Arrivals Unloaded Number Unloaded
1 0 52 3 3 37 3
2 0 06 0 0 63 0
3 0 50 3 3 28 3
4 0 88 4 4 02 1
5 3 53 3 6 74 4
6 2 30 1 3 35 3
7 0 10 0 0 24 0
8 0 47 3 3 03 1
9 2 99 5 7 29 3
10 4 37 2 6 60 3
11 3 66 3 6 74 4
12 2 91 5 7 85 4
13 3 35 2 5 90 4
14 1 32 2 3 73 3
15 0 00 5 5 59 3
20 41 39
Queuing Simulation
Average number of barges 20 delays
=
delayed to the next day 15 days
= 1.33 barges delayed per day
Average number of 41 arrivals
=
nightly arrivals 15 days
= 2.73 arrivals per night
Average number of barges 39 unloadings
=
unloaded each day 15 days
= 2.60 unloadings per day
Inventory Simulation
Daily demand for Ace Drill
(1) (2) (3) (4) (5)
Demand for Cumulative Interval of
Ace Drill Frequency Probability Probability Random Numbers
0 15 .05 .05 01 through 05
1 30 .10 .15 06 through 15
2 60 .20 .35 16 through 35
3 120 .40 .75 36 through 75
4 45 .15 .90 76 through 90
5 30 .10 1.00 91 through 00
300 1.00
Table F.8
Inventory Simulation
Reorder lead time
(1) (2) (3) (4) (5)
Demand for Cumulative Interval of
Ace Drill Frequency Probability Probability Random Numbers
1 10 .20 .20 01 through 20
2 25 .50 .70 21 through 70
3 15 .30 1.00 71 through 00
50 1.00
Table F.9
Inventory Simulation
1. Begin each simulation day by checking to see if ordered inventory has arrived.
If if has, increase current inventory by the quantity ordered.
2. Generate daily demand using probability distribution and random numbers.
3. Compute ending inventory. If on-hand is insufficient to meet demand, satisfy
as much as possible and note lost sales.
4. Determine whether the day's ending inventory has reached the reorder point.
If it has, and there are no outstanding orders, place an order. Choose lead time
using probability distribution and random numbers.
Inventory Simulation
Order quantity = 10 units Reorder point = 5 units Table F.10
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
Units Beginning Random Ending Lost Random Lead
Day Received Inventory Number Demand Inventory Sales Order? Number Time
1 10 06 1 9 0 No
2 0 9 63 3 6 0 No
3 0 6 57 3 3 0 Yes 02 1
4 0 3 94 5 0 2 No
5 10 10 52 3 7 0 No
6 0 7 69 3 4 0 Yes 33 2
7 0 4 32 2 2 0 No
8 0 2 30 2 0 0 No
9 10 10 48 3 7 0 No
10 0 7 88 4 3 0 Yes 14 1
41 2
Inventory Simulation
41 total units
Average ending inventory = = 4.1 units/day
10 days
2 sales lost
Average lost sales = = .2 unit/day
10 days
Average number of 3 orders
orders placed = = .3 order/day
10 days
Inventory Simulation
Daily order cost = (cost of placing 1 order) x
(number of orders placed per day)
= $10 per order x .3 order per day = $3
Daily holding cost = (cost of holding 1 unit for 1 day) x
(average ending inventory)
= 50¢ per unit per day x 4.1 units per day
= $2.05
Daily stockout cost = (cost per lost sale) x
(average number of lost sales per day)
= $8 per lost sale x .2 lost sales per day
= $1.60
Total daily inventory cost = Daily order cost + Daily holding cost +
Daily stockout cost
= $6.65
Using Software in Simulation
Computers are critical in simulating complex
tasks
General-purpose languages - BASIC, C++
Special-purpose simulation languages - GPSS,
SIMSCRIPT
1. Require less programming time for large simulations
2. Usually more efficient and easier to check for errors
3. Random-number generators are built in
Using Software in Simulation
Commercial simulation programs are available
for many applications - Extend, Modsim,
Witness, MAP/1, Enterprise Dynamics,
Simfactory, ProModel, Micro Saint, ARENA
Spreadsheets such as Excel can be used to
develop some simulations
Using Software in Simulation
