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MIS 463 Decision Support Systems for Business. Simulation -Part 1 Aslı Sencer. Simulation. – V ery broad term – methods and applications to imitate or mimic real systems, usually via computer Applies in many fields and industries Very popular and powerful method. Advantages of Simulation.

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  • – Very broad term – methods and applications to imitate or mimic real systems, usually via computer
  • Applies in many fields and industries
  • Very popular and powerful method

MIS 463-Aslı Sencer

advantages of simulation
Advantages of Simulation
  • Simulation can tolerate complex systems where analytical solution is not available.
  • Allows uncertainty, nonstationarity in modeling unlike analytical models
  • Allows working with hazardous systems
  • Often cheaper to work with the simulated system
  • Can be quicker to get results when simulated system is experimented.

MIS 463-Aslı Sencer

the bad news
The Bad News
  • Don’t get exact answers, only approximations, estimates
  • Requires statistical design and analysis of simulation experiments
  • Requires simulation expert and compatibility with a simulation software
  • Softwares and required hardware might be costly
  • Simulation modeling can sometimes be time consuming.

MIS 463-Aslı Sencer

different kinds of simulation
Different Kinds of Simulation
  • Static vs. Dynamic
    • Does time have a role in the model?
  • Continuous-change vs. Discrete-change
    • Can the “state” change continuously or only at discrete points in time?
  • Deterministic vs. Stochastic
    • Is everything for sure or is there uncertainty?

MIS 463-Aslı Sencer

using computers to simulate
Using Computers to Simulate
  • General-purpose languages (C, C++, Visual Basic)
  • Simulation softwares, simulators
    • Subroutines for list processing, bookkeeping, time advance
    • Widely distributed, widely modified
  • Spreadsheets
    • Usually static models
    • Financial scenarios, distribution sampling, etc.

MIS 463-Aslı Sencer

simulation languages and simulators
Simulation Languages and Simulators
  • Simulation languages
    • Provides flexibility in programming
    • Syntax knowledge is required
  • High-level simulators
    • GPSS/H, Automod, Slamsystem, ARENA, Promodel
    • Limited flexibility — model validity?
    • Very easy, graphical interface, no syntax required
    • Domain-restricted (manufacturing, communications)

MIS 463-Aslı Sencer

popularity of simulation
Popularity of Simulation
  • Consistently ranked as the most useful, popular tool in the broader area of operations research / management science
    • 1979: Survey 137 large firms, which methods used?

1. Statistical analysis (93% used it)

2. Simulation (84%)

3. Followed by LP, PERT/CPM, inventory theory, NLP,

    • 1980: (A)IIE O.R. division members
      • First in utility and interest — simulation
      • First in familiarity — LP (simulation was second)
    • 1983, 1989, 1993: Heavy use of simulation consistently reported

1. Statistical analysis2. Simulation

MIS 463-Aslı Sencer

today popular topics
Today: Popular Topics
  • Real time simulation
  • Web based simulation
  • Optimization using simulation

MIS 463-Aslı Sencer

simulation process
Simulation Process
  • Develop a conceptual model of the system
    • Define the system, goals, objectives, decision variables, output measures, input variables and parameters.
  • Input data analysis:
    • Collect data from the real system, obtain probability distributions of the input parameters by statistical analysis
  • Build the simulation model:
    • Develop the model in the computer using a HLPL, a simulation language or a simulation software

MIS 463-Aslı Sencer

simulation process cont d
Simulation Process (cont’d.)
  • Output Data Analysis:
    • Run the simulation several times and apply statistical analysis of the ouput data to estimate the performance measures
  • Verification and Validation of the Model:
    • Verification: Ensuring that the model is free from logical errors. It does what it is intended to do.
    • Validation: Ensuring that the model is a valid representation of the whole system. Model outputs are compared with the real system outputs.

MIS 463-Aslı Sencer

simulation process cont d1
Simulation Process (cont’d.)
  • Analyze alternative strategies on the validated simulation model. Use features like
    • Animation
    • Optimization
    • Experimental Design
  • Sensitivity analysis:
    • How sensitive is the performance measure to the changes in the input parameters? Is the model robust?

MIS 463-Aslı Sencer

static simulation monte carlo simulation
Static Simulation:Monte-Carlo Simulation
  • Static Simulation with no time dimension.
  • Experiments are made by a simulation model to estimate the probability distribution of an outcome variable, that depends on several input variables.
  • Used the evaluate the expected impact of policy changes and risk involved in decision making.
  • Ex: What is the probability that 3-year profit will be less than a required amount?
  • Ex: If the daily order quantity is 100 in a newsboy problem, what is his expected daily cost? (actually we learned how to answer this question analytically)

MIS 463-Aslı Sencer

ex1 simulation for dave s candies
Ex1: Simulation for Dave’s Candies
  • Dave’s Candies is a small family owned business that offers gourmet chocolates and ice cream fountain service. For special occasions such as Valentine’s day, the store must place orders for special packaging several weeks in advance from their supplier. One product, Valentine’s day chocolate massacre, is bought for $7,50 a box and sells for $12.00. Any boxes that are not sold by February 14 are discounted by 50% and can always be sold easily. Historically Dave’s candies has sold between 40-90 boxes each year with no apparent trend. Dave’s dilemma is deciding how many boxes to order for the Valentine’s day customers.

MIS 463-Aslı Sencer

ex1 dave s candies simulation
Ex1: Dave's Candies Simulation

If the order quantity, Q is 70, what is the expected profit?

Selling price=$12


Discount price=$6

  • If D<Q

Profit=selling price*D - cost*Q + discount price*(Q-D)

  • D>Q

Profit=selling price*Q-cost*Q

MIS 463-Aslı Sencer

generating demands using random numbers
Generating Demands Using Random Numbers
  • During simulation we need to generate demands so that the long run frequencies are identical to the probability distribution found.
  • Random numbers are used for this purpose. Each random number is used to generate a demand.
  • Excel generates random numbers between 0-1. These numbers are uniformly distributed between 0-1.

MIS 463-Aslı Sencer

MIS 463-Aslı Sencer Erdem

generating random demands inverse transformation technique
Generating random demands:Inverse transformation technique









Generate U~UNIFORM(0,1)

Let U=P(Demand<=D) then D=P-1(U)






40 50 60 70 80 90

40 50 60 70 80 90



MIS 463-Aslı Sencer

generating demands
Generating Demands

MIS 463-Aslı Sencer

ex1 simulation in excel for dave s candies
Ex1: Simulation in Excel for Dave’s Candies

Use the following excel functions to generate a random demand with a given distribution function.

  • RAND(): Generates a random number which is uniformly distributed between 0-1.
  • VLOOKUP(value, table range, column #): looks up a value in a table to detremine a random demand.
  • IF(condition, value if true, value if false): Used to calculate the total profit according to the random demand.

MIS 463-Aslı Sencer

the system a simple processing system




Blank Parts


Finished Parts





Queue (FIFO)

Part in Service

The System:A Simple Processing System
  • General intent:
    • Estimate expected production
    • Waiting time in queue, queue length, proportion of time machine is busy
  • Time units
    • Can use different units in different places … must declare
    • Be careful to check the units when specifying inputs
    • Declare base time units for internal calculations, outputs
    • Be reasonable (interpretation, roundoff error)

MIS 463-Aslı Sencer

model specifics
Model Specifics
  • Initially (time 0) empty and idle
  • Base time units: minutes
  • Input data (assume given for now …), in minutes:

Part Number Arrival Time Interarrival Time Service Time

1 0.00 1.73 2.90

2 1.73 1.35 1.76

3 3.08 0.71 3.39

4 3.79 0.62 4.52

5 4.41 14.28 4.46

6 18.69 0.70 4.36

7 19.39 15.52 2.07

8 34.91 3.15 3.36

9 38.06 1.76 2.37

10 39.82 1.00 5.38

11 40.82 . .

. . . .

. . . .

  • Stop when 20 minutes of (simulated) time have passed

MIS 463-Aslı Sencer

goals of the study output performance measures
Goals of the Study:Output Performance Measures
  • Total production of parts over the run (P)
  • Average waiting time of parts in queue:
  • Maximum waiting time of parts in queue:

N = no. of parts completing queue wait

WQi = waiting time in queue of ith part

Know: WQ1 = 0 (why?)

N> 1 (why?)

MIS 463-Aslı Sencer

goals of the study output performance measures cont d
Goals of the Study:Output Performance Measures (cont’d.)
  • Time-average number of parts in queue:
  • Maximum number of parts in queue:
  • Average and maximum total time in system of parts (a.k.a. cycle time):

Q(t) = number of parts in queue

at time t

TSi = time in system of part i

MIS 463-Aslı Sencer

goals of the study output performance measures cont d1
Goals of the Study:Output Performance Measures (cont’d.)
  • Utilization of the machine (proportion of time busy)
  • Many others possible (information overload?)

MIS 463-Aslı Sencer

pieces of a simulation model
Pieces of a Simulation Model
  • Entities
    • “Players” that move around, change status, affect and are affected by other entities
    • Dynamic objects — get created, move around, leave (maybe)
    • Usually represent “real” things
      • Our model: entities are the parts
    • Can have “fake” entities for modeling “tricks”
      • Breakdown demon, break angel
    • Usually have multiple realizations floating around
    • Can have different types of entities concurrently
    • Usually, identifying the types of entities is the first thing to do in building a model

MIS 463-Aslı Sencer

pieces of a simulation model cont d
Pieces of a Simulation Model (cont’d.)
  • Attributes
    • Characteristic of all entities: describe, differentiate
    • All entities have same attribute “slots” but different values for different entities, for example:
      • Time of arrival
      • Due date
      • Priority
      • Color
    • Attribute value tied to a specific entity
    • Like “local” (to entities) variables
    • Some automatic in Arena, some you define

MIS 463-Aslı Sencer

pieces of a simulation model cont d1
Pieces of a Simulation Model (cont’d.)
  • (Global) Variables
    • Reflects a characteristic of the whole model, not of specific entities
    • Used for many different kinds of things
      • Travel time between all station pairs
      • Number of parts in system
      • Simulation clock (built-in Arena variable)
    • Name, value of which there’s only one copy for the whole model
    • Not tied to entities
    • Entities can access, change variables
    • Writing on the wall
    • Some built-in by Arena, you can define others

MIS 463-Aslı Sencer

pieces of a simulation model cont d2
Pieces of a Simulation Model (cont’d.)
  • Resources
    • What entities compete for
      • People
      • Equipment
      • Space
    • Entity seizes a resource, uses it, releases it
    • Think of a resource being assigned to an entity, rather than an entity “belonging to” a resource
    • “A” resource can have several units of capacity
      • Seats at a table in a restaurant
      • Identical ticketing agents at an airline counter
    • Number of units of resource can be changed during the simulation

MIS 463-Aslı Sencer

pieces of a simulation model cont d3
Pieces of a Simulation Model (cont’d.)
  • Queues
    • Place for entities to wait when they can’t move on (maybe since the resource they want to seize is not available)
    • Have names, often tied to a corresponding resource
    • Can have a finite capacity to model limited space — have to model what to do if an entity shows up to a queue that’s already full
    • Usually watch the length of a queue, waiting time in it

MIS 463-Aslı Sencer

pieces of a simulation model cont d4
Pieces of a Simulation Model (cont’d.)
  • Statistical accumulators
    • Variables that “watch” what’s happening
    • Depend on output performance measures desired
    • “Passive” in model — don’t participate, just watch
    • Many are automatic in Arena, but some you may have to set up and maintain during the simulation
    • At end of simulation, used to compute final output performance measures

MIS 463-Aslı Sencer

pieces of a simulation model cont d5
Pieces of a Simulation Model (cont’d.)
  • Statistical accumulators for the simple processing system
    • Number of parts produced so far
    • Total of the waiting times spent in queue so far
    • No. of parts that have gone through the queue
    • Max time in queue we’ve seen so far
    • Total of times spent in system
    • Max time in system we’ve seen so far
    • Area so far under queue-length curve Q(t)
    • Max of Q(t) so far
    • Area so far under server-busy curve B(t)

MIS 463-Aslı Sencer

simulation by hand
Simulation by Hand
  • Manually track state variables, statistical accumulators
  • Use “given” interarrival, service times
  • Keep track of event calendar
  • “Lurch” clock from one event to the next
  • Will omit times in system, “max” computations here (see text for complete details)

MIS 463-Aslı Sencer

simulation by hand s etup
Simulation by Hand: Setup

MIS 463-Aslı Sencer

simulation by hand finishing up
Simulation by Hand:Finishing Up
  • Average waiting time in queue:
  • Time-average number in queue:
  • Utilization of drill press:

MIS 463-Aslı Sencer

event based simulation table
Event-Based Simulation Table

MIS 463-Aslı Sencer

entity based simulation table
Entity-Based Simulation Table

The last thing occurs

in a simulation

will be

arrival of 7th item!

Since simulation

ends at 20th


6th item’s process

will not be


MIS 463-Aslı Sencer

randomness in simulation
Randomness in Simulation
  • The above was just one “replication” — a sample of size one (not worth much)
  • Made a total of five replications:
  • Confidence intervals for expected values:
    • In general,
    • For expected total production,






MIS 463-Aslı Sencer

comparing alternatives
Comparing Alternatives
  • Usually, simulation is used for more than just a single model “configuration”
  • Often want to compare alternatives, select or search for the best (via some criterion)
  • Simple processing system: What would happen if the arrival rate were to double?
    • Cut interarrival times in half
    • Rerun the model for double-time arrivals
    • Make five replications

MIS 463-Aslı Sencer

results original vs double time arrivals
Results: Original vs. Double-Time Arrivals
  • Original – circles
  • Double-time – triangles
  • Replication 1 – filled in
  • Replications 2-5 – hollow
  • Note variability
  • Danger of making decisions based on one (first) replication
  • Hard to see if there are really differences
  • Need: Statistical analysis of simulation output data

MIS 463-Aslı Sencer