4th Edition

N. D. Vohra

Quantitative Techniques in Management

2010

Chapter 17

1. 2. 3. 4.

Introduction to Simulation Process of Simulation Monte Carlo Simulation Random Numbers and Generation 5. Illustrations

Their

a) Simulation of an Inventory System b) Simulation of a Queuing System

6. Advantages and Disadvantages of Simulation

Simulation: a descriptive method To simulate is to replicate a system Phases of simulation process: Definition of the problem and statement of objectives Construction of an appropriate model Experimentation with the model constructed Evaluation of the results of simulation

Uses random numbers to generate data Process calls for:

Determination of random number intervals Obtaining random numbers and finding the input values corresponding to them Carrying out needed simulation

Is used extensively in areas like capital budgeting; inventory control; queuing analysis; and project management

Example 17.4 data

Hot Water Heater Sales
4 5 6 7

No. of weeks
6 5 9 12

8
9 10

8
7 3

Objective: to simulate demand for 20 weeks using the following random numbers: 10, 24, 03, 32, 23, 59, 95, 34, 34, 51, 08, 48, 66, 97, 03, 96, 46, 74, 77, 44

Assignment of Random Numbers

Demand 4 5 6 7 8 9 10 Total No. of weeks 6 5 9 12 8 7 3 50 Prob. 0.12 0.10 0.18 0.24 0.16 0.14 0.06 1.00 Cumulat Random ive Number Prob. Interval 0.12 0.22 0.40 0.64 0.80 0.94 1.00 00 11 12 21 22 39 40 63 64 79 80 93 94 99

Week
1 2 3

Random Number
10 24 03

Demand
4 6 4

4
5 6 7 8 9 10 11 12 13 14 15

32
23 59 95 34 34 51 08 48 66 97 03

6
6 7 10 6 6 7 4 7 8 10 4

(continued)
Week
16
17 18 19 20 Total

Random Number
96
46 74 77 44

Demand
10
7 8 8 7 135

Average Demand = 135/20 = 6.75

Number of times out-of-stock = 3 since demand has exceeded the stock of 8 units during three weeks

Example 17.8 data

Random Numbers to use:

67, 63, 39, 55, 29, 78, 70, 06, 78, 76 Probability Distributions
Event
No Rain

Probability
0.50

Rained on Previous day:

1 cm rain
2 cm rain 3 cm rain 4 cm rain 5 cm rain

0.25
0.15 0.05 0.03 0.02

Event

Probability
0.75 0.15 0.06 0.04

No rain on Previous day:

No Rain 1 cm rain 2 cm rain 3 cm rain

Table 1
Event
No Rain 1 cm rain 2 cm rain 3 cm rain 4 cm rain 5 cm rain

Cumulative Probability Probability

0.50 0.25 0.15 0.05 0.03 0.02 0.50 0.75 0.90 0.95 0.98 1.00

Random Number Interval

00 49 50 74 75 89 90 94 95 97 98 - 99

Table 2
Event
No Rain 1 cm rain 2 cm rain 3 cm rain

Cumulative Probability Probability

0.75 0.15 0.06 0.04 0.75 0.90 0.96 1.00

Random Number Interval

00 74 75 89 90 95 96 - 99

Day
1

Random Number
67

Rainfall
No rain

Table Reference*
Table 2*

2
3 4 5 6 7 8 9 10

63
39 55 29 78 70 06 78 76 Total

No rain
No rain No rain No rain 1 cm 1 cm No rain 1 cm 2 cm 5 cm

Table 2
Table 2 Table 2 Table 2 Table 2 Table 1 Table 1 Table 2 Table 1

* Given to assume that there was no rain the previous day

Days without rain = 6, Total Rainfall = 5 cm

Mark the wrong statement:

1. To simulate means to imitate a system.
2. Simulation involves developing a model of some real phenomenon and then experimenting on it. 3. Simulation is a powerful mathematical modelling tool. 4. Simulation is very beneficial since results of taking a particular course of action can be estimated prior to its implementation in real world.

Which of the following is not a phase of simulation process?

1. Definition of the problem and statement of objectives. 2. Construction model. of an appropriate

3. Experimentation situations.

in

real

life

4. Performing experiments on the model evolved.

Which of the following is not true about simulation? 1. It is a very effective substitute for hunch and intuition in decisionmaking. 2. It is an optimising technique. 3. It seeks to determine how the system under consideration would behave in certain conditions. 4. It is effectively used in decisionmaking situations that cannot be handled with mathematical methods.

Mark the wrong statement:

1. A clear statement of the problem facilitates the development of an appropriate model.

2. Simulation aims to determine how the system under consideration would behave under certain conditions.
3. The scope and level of detail of simulation should be decided upon carefully.

4. The output of a simulation model is independent of the size of simulation run.

Mark the wrong statement:

1. During the course of a simulation, the model mimics the important elements of what is being simulated. 2. A simulation model can never be physical. 3. The model for simulation must be so designed that it would enable evaluation of the key decision alternatives. 4. In a mathematical model, mathematical symbols or equations are used to represent system relationships.

Mark the wrong statement:

1. For a deterministic model, a single simulation run is sufficient.
2. Probabilistic simulation is like random sampling whose output is subject to statistical error. 3. Monte Carlo simulation involves modelling a deterministic system. 4. Randomness is a key requirement of Monte Carlo simulation.

Which of the following statements is not true?

1. In Monte Carlo simulation, a problem is solved by simulating the original data with random number generators. 2. A random number generator is a procedure or device to obtain random numbers. 3. In a series of random numbers, different digits appear in a definite, ordered fashion. 4. Random numbers generated by midsquare method are called pseudorandom numbers.

Mark the correct statement.

1. Simulation cannot be used where mathematical methods can be used. 2. Solutions to decision problems by using simulation would be identical to those using mathematical models. 3. Simulation is descriptive in nature. 4. One drawback of using simulation is that it is only applicable where all quantities are deterministic.

Given the following distribution:

Demand (Units) Probability 10 .05 15 .25 20 .30 25 .28 30 .12

For a five-day demand simulation, random numbers are: 89, 32, 01, 12 and 30. What is the average daily demand?
1. 2. 3. 4. 100 units 19 units 20 units none of the above

One can increase the chance that results of simulation are not erroneous by:
1. Changing the input parameters. 2. Using discrete probability distributions and not continuous. 3. Validating the simulation. 4. All of the above.