1. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 F-1 Operations Management Simulation Module F

2. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 F-2 Outline  What is Simulation  Advantages and Disadvantages of Simulation  Monte Carlo Simulation  Simulation of a Queuing Problem

3. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 F-3 Learning Objectives When you complete this chapter, you should be able to :  Identify or Define :  Monte Carlo simulation  Random numbers  Random number interval  Simulation software  Explain or be able to use:  The advantages and disadvantages of modeling with simulation

4. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 F-4  Numerical technique of experimentation  Attempts to duplicate a system  Features  Behavior  Requires description of system  Many application areas  Operations management  Finance & economics Simulation

5. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 F-5 Simulation The idea behind simulation is to:  Imitate a real-world situation mathematically  Study its properties and operating characteristics  Draw conclusions and make action recommendations based on the results of the simulation

6. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 F-6 The Process of Simulation Define the Problem Introduce important variables Construct simulation model Specify values of variables to be tested Conduct the simulation Examine the results Select best course of action

7. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 F-7 The Monte Carlo Simulation Technique  Setup probability distribution for important variables  Build cumulative distribution for each variable  Establish interval of random numbers for each variable  Generate random numbers  Simulate a series of trials

8. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 F-8 Advantages of Simulation Simulation  is very flexible, relatively straightforward  can be used to analyze large and complex real-world problems for which closed-form analytical solutions are not possible  allows for the inclusion of real-world complications which most other techniques do not permit  makes possible “time compression”  allows one to ask “what if” type questions  does not interfere with the real-world system  allows us to study the interactive effect of individual components or variables

9. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 F-9 Advantages of Simulation Simulation  flexible, straightforward  can analyze large, complex real-world problems for which no closed-form analytical solutions exists  can include real-world complications which most other techniques cannot  enables “time compression”  allows “what if” type questions  does not interfere with the real-world system  allows study of relationships

10. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 F-10 Simulation:  Can be expensive and time consuming  Does not yield optimal solution  Requires good managerial input  Results not generalizable to other situations © 1984-1994 T/Maker Co. Disadvantages of Simulation

11. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 F-11 Many World Variables Which Are Probabilistic in Nature. Examples:  Inventory demand  Lead time for orders to arrive  Time between machine breakdowns  Times between arrivals at a service facility  Service times  Times to complete project activities  Number of employees absent from work each day

12. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 F-12 Simulation and Inventory Analysis - the Basic Model Begin Increase current inv by qty order end inv = begin-demand # of lost sales End inv = 0 Generate Random lead time Place order Compute averages End Enough Days in simulation? Order placed & not arrived? End inv < reorder point? demand > begin inv? Order arrived? random # for today's demand