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Simulation

Simulation. Professor Stephen Lawrence Leeds School of Business University of Colorado Boulder, CO 80309-0419. Simulation Agenda. Types of simulation Uses of simulation Simulation examples Manual call center example Queueing simulation (spreadsheet) Financial simulation (spreadsheet)

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Simulation

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  1. Simulation Professor Stephen Lawrence Leeds School of Business University of Colorado Boulder, CO 80309-0419

  2. Simulation Agenda • Types of simulation • Uses of simulation • Simulation examples • Manual call center example • Queueing simulation (spreadsheet) • Financial simulation (spreadsheet) • Commercial simulation products • Pros and cons of simulation

  3. What is Simulation? • Process of creating mathematical models that represent real world business operations • Design and test new systems • Prevent unwise expenditures • Reduce risk • Maximize effectiveness of scarce resources • Anticipate problems, plan solutions Systems Modeling Corp., CINEMA software demo, 1991

  4. Types of Simulation • Continuous Time Simulation • Differential Equations (e.g., System Dynamics) • Discrete Event Simulation • Distinct events occur over time • Time of occurrence may be random • Examples • Job arrivals, machine breakdowns, patient emergencies, client calls, etc…

  5. Manufacturing Auto parts Apparel and textiles Electronics Food and beverages Printing, newspapers Metal fabrication Consumer goods Pharmaceuticals Services Airlines and airports Distribution Restaurants Health care Banking and finance Transportation Call/service centers Defense Uses of Simulation

  6. Types of Problems Examined • Scheduling resources, jobs, customers • Distribution and transportation • Allocation of employees • Materials handling • Communication networks • Facility layout • Ad infinitum…

  7. Examples of Simulation Models

  8. Manual Call Center Simulation New VentureCall Center is a contract call center for startup Internet businesses. Client customers call to place orders, ask questions, and receive questions. NVCC currently employs only a single operator. Call interarrival times are uniformly distributed on the interval [1,6] minutes. Service times are uniformly distributed on the interval [1,5] minutes. Unfortunately, the telephone switch used by NVCC is unreliable and frequently breaks down. Breakdowns occur at the end of a call with a probability of 1/12. Time to repair the breakdown is uniformly distributed on the interval [1,3] minutes.

  9. Job Interarrival Time (rv) Arrival Time Start Time Processing Time (rv) Finish Time Time in System Time in Queue Manual Call Center Simulation

  10. Queueing Simulation • General G/G/k queues • Collect standard performance queue performance statistics • Demonstrate queue variability • Excel Spreadsheet

  11. Financial Simulation • Model future growth of several securities indices • Use historic performance to model future activity • Demonstrate market volatility • Excel spreadsheet

  12. Monte Carlo Simulation • Randomly sample variables • “Throw the dice” to determine variable values • Useful to determine range of outcomes • Commercial spreadsheet add-ins • Crystal Ball • @Risk • Excel example (Crystal Ball)

  13. Commercial Simulation Packages • Number of “easy to use” commercial simulation packages available • Prices range from $100’s to $10,000s • Examples • Simscript • ProSIM • MicroSaint • ARENA • Extend

  14. Issues with Simulation • Model Validation • Does model replicate current reality? • Experimental Design • Statistical design to “prove” results • Transient vs. Steady-State Behavior

  15. Pros and Cons of Simulation • CONS • Difficult, time-consuming to build and maintain • Validation important but tricky • Does not optimize -- may settle for inferior results • PROS • Can model almost any complex business activity • Provides useful managerial insight • Allows extensive what-if analysis • Optimizing tools becoming available

  16. Simulation Professor Stephen Lawrence Leeds School of Business University of Colorado Boulder, CO 80309-0419

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