1. Areas Of Simulation Application
Waiting lines/service
Inventory management
Production & manufacturing systems
Supply chain systems
Service operations
Environmental & resource analysis

2. Building a Simulation Model
Define the problem, objectives and variables
Random variables (source of uncertainty)
Decision variables
Create a model to represent the problem
Design the logic between the variables (formulas, flowcharts)
Collect data for the probability distributions
Create a computer program or template

3. Building a Simulation Model (continued)
Validate the model
Check formulas and logic especially in copied rows
Design “what-if” strategies for the decision variables
Run the model MANY times for each possible “what-if” strategy to see what would happen on average, in the worst case as well as in the best case scenario.

4. Monte Carlo Simulation
Use random numbers that have an equal likelihood of being selected (lottery balls) to select numbers from a probability distribution
Use these values to observe how a model of a system performs over time

5. Distribution Of Demand
Cases demanded Frequency of Probability of
per week, x Demand Demand P(x)

6. Roulette Wheel Of Demand90
x = 18
x = 14 20 80
x = 17
x = 16
x = 15 60

7. Russell/Taylor Oper Mgt 3/e
Random Number Table
© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e

8. Generating Demand From Random Numbers
Demand Ranges of Random Numbers
x r
r = 39

9. 15 Weeks Of Demand Average demand = 241/15 = 16.1 cases per week
Week r Demand (x)
Week r Demand (x)
 = 241
Average demand = 241/15 = 16.1 cases per week