Simulation 699

Here it may be noted that simulated mean project completion time of 25.4 days is almost two days
longer than the 23.6 days completion time, indicated using expected values alone.

CONCEPTUAL QUESTIONS

1. Distinguish between solutions derived from simulation models control, where the demand is probabilistic and lead time is
and solutions derived from analytical models? random.
2. What are random numbers? Why are random numbers useful 11. Discuss the Monte Carlo method of solving a problem, illustrat-
in simulation models and in solutions derived from analytical ing it by outlining a procedure to solve a specified problem of
models? your choice.
3. (a) What are the advantages and limitations of simulation 12. Describe the kind of problems for which Monte Carlo will be an
models? [Delhi Univ., MBA, 2003] appropriate method of solution.
(b) What are the advantages and disadvantages of simulation 13. Explain what factors must be considered when designing a
over the use of analytical models? Is the use of computers simulation experiment.
in simulation absolutely essential? 14. Draw a flow chart to describe the simulation of a simple system.
4. What is Monte Carlo simulation? Describe the idea of experi- 15. State the considerations involved in trading-off costs, with
mentation (Random sampling) in simulation. reliability in designing a simulation experiment.
5. ‘Monte Carlo technique has been used to tackle a variety of
16. ‘. . . simulation is a quantitative technique developed for studying
problems involving stochastic situations and mathematical prob-
alternative courses of action by building a model of that system
lems which cannot be solved with mathematical techniques and
and then conducting a series of repeated trial and error experi-
where physical experimentation with the actual system is im-
ments to predict the behaviour of the system over a period of
practicable.’ Discuss. [AMIE, 2004 ]
time.’ Discuss.
6. ‘When it becomes difficult to use an optimization technique for 17. Why is a computer necessary in conducting a real-world
solving a problem, one has to resort to simulation technique.’ simulation?
Discuss. [Delhi Univ., MBA, 2003, AMIE, 2005 ] 18. Do you think the application of simulation will strongly increase in
7. ‘Simulation typically is nothing more or less than the technique the next ten years? Give reasons for your answer.
of performing sampling experiments on the model of the system.’ 19. What types of problems can be solved more easily by quanti-
Discuss. tative techniques other than simulation?
8. State two major reasons of using simulation. Explain the basic 20. Why would an analyst ever prefer a general purpose language
steps of Monte Carlo simulation. Briefly describe its application such as FORTRAN or BASIC in a simulation when there are
in Finance and Accounting. advantages of using special purpose languages such as GPSS
9. Define simulation. Why is simulation used? Give one application or SIMSCRIPT?
area when this technique is used in practice.
21. Explain the methods of gathering statistical observations in
10. Explain how simulation can be applied in the case of inventory simulation modelling. [AMIE, 2004 ]

SELF PRACTICE PROBLEMS

1. Bharat Transport Company is considering discontinuing its
Daily Demand Probability
leasing of 12 pickups and delivery trucks. If it does this, it will
have to buy 12 trucks right away and buy replacement trucks 25,001–45,000 0.30
in the future, one by one, as and when the old ones wear out.
45,000–55,000 0.30
The question that the Bharat Transport Company’s manager
wants to answer is how many trucks will they have to buy during 55,000–65,000 0.40
the next five years (including the initial 12 trucks) in order to
(a) What is the expected daily demand?
keep 12 trucks in operation all the time. At the moment, they are
(b) Construct a model that can be used to simulate the
not concerned with the fact that at the end of five years they
company’s daily receiving, storage and shipping activities.
will have 12 trucks in hand, some of which will be relatively new
and some of which will be old. The only question is how many 3. XYZ company operates an automatic car-wash facility in a city.
will have to be purchased so that they can plan their cash The manager is concerned about the long lines of cars that build
requirements accordingly. The following table shows a history of up while waiting for service. The service time for the system is
truck life: machine-paced and thus constant. The manager has the oppor-
tunity to decrease the service time by increasing the speed of
Truck life (months) : 12 15 18 21 24 27 30 the conveyor that pulls the cars through the system. Of course,
Percentage of trucks the quicker the pace, the lower is the quality of the car-wash.
which have worn out : 5 10 20 25 30 5 5 The manager wants to study the effects of setting the system
2. A gas transport company controls pipe-lines between several for a 2-minute car-wash. The following data on customer arrivals
natural gas fields and out of state distributors. The company has have been gathered.
a 1,00,000 unit storage capacity. Because of certain govern- Interarrival time (minutes) : 1 3 3 4 5
ment regulations, the company receives either 40,000 or 60,000 Number of occurrences : 136 34 102 51 17
units per day but the probability of receiving such quantity is not (a) Compare the traffic density for a service rate of 2 minutes
equal. The actual demand for natural gas is given by the per car.
following table: (b) Simulate the arrival of 20 customers. The doors open at
8.00 a.m.
700 Operations Research: Theory and Applications

Compute the average waiting time per customer, the aver- 7. A retail store distributes catalogues and takes orders by tele-
age time spent in the system, the percentage of time the system phone. Distributions for intervals between incoming calls and the
is ideal, and the maximum queue length. length of time required to complete each call are given below.
4. The customers of State Distribution Corporation send their own The store management has determined that the probability that
purchase orders. In the past, the arrival of these purchase a caller will have to wait for more than 10 seconds for a call to
orders, per day, has approximated a normal distribution with a be answered should not be more than 5 per cent. Use simulation
mean of 50 and a standard deviation of 6. In terms of the to determine how many sales representatives should be avail-
probability of occurrence, the following is being indicated: able to answer incoming calls.

Interval between Probability Length of Call Probability

Number of Probability of Incoming Calls (seconds)
Purchase Orders Occurrence (seconds)
26–32 00.5 10 0.08 60 0.07
32–38 02.0 12 0.11 65 0.12
38–44 13.0 14 0.14 70 0.18
44–50 36.0 16 0.16 75 0.16
50–56 33.0 18 0.14 80 0.15
56–62 13.0 20 0.12 85 0.12
62–68 02.0 22 0.08 90 0.08
68–74 00.5 24 0.07 95 0.06
26 0.04 100 0.06
Develop a Monte Carlo simulation for the number of pur- 28 0.04
chase orders per day to be expected for a particular month. If 30 0.02
the firm can purchase only 41 orders per day, how many days
8. A firm has single channel service station with the following arrival
in that month would the firm be behind schedule?
and service time probability distributions:
5. The materials manager of a firm wishes to determine the
expected (mean) demand for a particular item in stock during
Arrivals Probability Service Time Probability
the reorder lead time. This information is needed to determine
(min) (min)
how far in advance he should reorder, before the stock level is
reduced to zero. However, both the lead time (in days) and the 1.0 0.35 1.0 0.20
demand per day, for the item, are random variables, described 2.0 0.25 1.5 0.35
by the probability distribution given below: 3.0 0.20 2.0 0.25
4.0 0.12 2.5 0.15
Lead Time Probability of Demand/Day Probability 5.0 0.08 3.0 0.05
(days) Occurrence (units)
The customer’s arrival at the service station is a random
1 0.50 1 0.10 phenomenon and the time between the arrival varies from one
2 0.30 2 0.30 minutes to five minutes. The service time varies from one minute
3 0.20 3 0.40 to three minutes. The queuing process begins at 10.00 a.m. and
4 0.20 proceeds for nearly 2 hours. An arrival goes to the service
Manually simulate the problem for 30 reorders to estimate the facility immediately, if it is free, otherwise it waits in a queue. The
demand during lead time. [Delhi Univ., MBA, 1995, 2000 ] queue discipline is first-come first-served.
If the attendant’s wages are Rs 8 per hour and the customer’s
6. An automatic machinery company receives a different number of waiting time costs Rs 9 per hour, then would it be an economical
orders each day and the orders vary in terms of the time required proposition to engage a second attendant? Answer on the basis
to process them. The firm is interested in determining how many of Monte Carlo simulation technique.
machines it should have in the departments in order to minimize
9. A certain maintenance facility is responsible for the upkeep of
the combined cost of machine idle and order waiting time. The firm
five machines. The machines, which fail frequently, must be
knows, from past experience, the average number of orders per
repaired as soon as possible in order to maintain as high a
day and the average number of hours per order, which are as
productive capacity of the production system as possible. The
follows:
management is concerned about the average down time per
machine and is considering an increase in the capacity of the
Number of Probability Hours/Order Probability maintenance facility. From historical data, the following distribu-
Orders/Day tions have been developed:
0 0.10 5 0.05
1 0.15 10 0.05 Time between Probability Repair Time Probability
2 0.25 15 0.10 Breakdown
3 0.30 20 0.10 (days)
4 0.15 25 0.20
2 0.05 1 0.40
5 0.05 30 0.25
3 0.10 2 0.50
35 0.15
4 0.15 3 0.10
40 0.10
5 0.40
Cost/hour of idle machine time = Rs 4.00 Cost-hour for orders 6 0.20
waiting = Rs 6.00 7 0.10
Assuming 24 hours working in three shifts, solve the problem
Simulate the failure and repair of 10 machines. Begin by
using simulation.
determining the time of the first breakdown by each of the 5
 Simulation 701

machines. Sequence the machines through the repair facility on 13. A confectioner sells confectionery items. Past data of demand
a first-come first-served basis. If there is more than one per week (in hundred kilograms), with frequency, is given below:
machine waiting to be repaired, arbitrarily choose one to repair Demand/week : 05 10 15 20 25
the next. After a machine has been repaired, determine its next
time of breakdown and continue until you have repaired 10. Frequency : 211 8 21 5 3
[Delhi Univ., MBA, 2003] Using the following sequence of random numbers, generate the
demand for the next 10 weeks. Also find the average demand
10. A trader has studied his varying monthly sales and monthly
per week:
expenses (including the value of goods) and has arrived at the
35, 52, 90, 13, 23, 73, 34, 57, 35, 83, 94, 56, 67, 66, 60.
following empirical distributions:
14. An owner of a petrol pump with a single attendant wishes to
(a) The trader at the beginning of the year has Rs 2,000 in the
perform a simulation of his operations to see whether any
bank. Simulate his sales and expenses over a year (two
improvement is possible. He studied the system and found that
times). Assume that the trader can avail temporary over-
an average of 6 customers arrive for service with random arrival
draft facilities to cover any negative balance.
times and form a queue, and the attendant provides service for
(b) How much money does the trader have at the end of the
exactly 9 minutes. For simulating the arrival times of customers,
year?
he has selected 10 random numbers with expected length of
interval equal to one as: 3.62, 1.78, 1.84, 1.31, 1.27 0.14, 1.71,
Monthly Sales Probability Monthly Expenses Probability 0.77, 0.97, 1.32. Find:
(’000) Rs (’000) Rs
(a) The total idle time for the attendant
15 0.30 12 0.15 (b) Total waiting time for the customers; and
16 0.25 13 0.20 (c) Maximum queue length during this period.
17 0.15 14 0.25 If the service time is reduced to 6 minutes what is the quality
18 0.15 15 0.20 of the service?
19 0.10 16 0.15 15. A machine shop has 30 machines. The following is the distribu-
20 0.05 18 0.05 tion sample of 73 breakdown of machines:
Time between : 10 11 12 13 14 15 16 17 18 18 19
11. The management of a company is considering the problem of breakdowns (hrs)
marketing a new product. The investment or the fixed cost Frequency : 4 10 14 16 12 6 4 3 3 3 1
required in the project is Rs 25,000. There are three factors that (Total = 73)
are uncertain – selling price, variable cost and the annual sales A study of time required to repair the machines by one mechanic
volume. The product has a life of only one year. The manage- yields the following distribution:
ment has past data regarding the possible levels of these three Repair time (hrs) : 8 9 10 11 12 13 14 15 1 6 17 18
factors.
Frequency : 2 3 8 16 1 4 12 8 5 3 1 1
(Total = 73)
Unit Probability Unit Probability Sales Probability
(a) Convert the distribution to cumulative probability distribu-
Selling Variable Volume
Price (Rs) Cost (Rs) (units)
tions. (b) Using a simulated sample of 20, estimate the
average per cent machine waiting time and the average per
40 0.30 20 0.10 3,000 0.20 cent idle time of the mechanic.
50 0.50 30 0.60 4,000 0.40 16. A gas transport company controls pipelines between several
60 0.20 40 0.30 5,000 0.40 natural gas fields and out of state distributors. The company has
a 1,00,000 unit storage capacity. Because of federal regulations,
Using Monte Carlo simulation technique, determine the average the company receives either 40,000 or 60,000 units per day.
profit from the said investment on the basis of 20 trials. There is no equal probability of either quantity being shipped on
12. A company manufactures 200 motor cycles per day. Depending a given day. The actual demand for natural gas is given by the
upon the availability of raw materials and other conditions, the following table of relative frequencies:
daily production has been varying from 196 motor cycles to 204
motor cycles, whose probability distribution is as given below: Daily Demand Probability

Production/day Probability 25,001–45,000 0.30

45,000–55,000 0.30
196 0.05 55,000–65,000 0.40
197 0.09
198 0.12 (a) What is the expected daily demand?
199 0.14 (b) Construct a model that can be used to simulate the
200 0.20 company’s daily receiving, storage and shipping activities.
201 0.15 Attempt a simulation for 12 months to establish a cashflow
202 0.11 pattern using random numbers from the following table:
203 0.08 9,548 5,099 9,747 3,755 4,162
204 0.06 4,552 6,291 1,830 7,263 7,010
9,969 8,265 1,572 7,705 1,352
The motor cycles are transported in a specially designed three- 3,512 4,191 4,570 4,826 3,140
storied lorry that can accommodate only 200 motor cycles.
Using the following random numbers: 82, 89, 78, 24, 52, 53, 61, State assumptions.
18, 45, 04, 23, 50, 77, 27, 54, 10, simulate the process to find 17. The materials manager of a company is interested in determin-
out: ing the reorder point for an item, the pattern of demand for which
(a) The average number of motor cycles waiting in the factory? is given below:
(b) The average number of empty spaces on the lorry? No. of units per day : 0 1 2 3 4 5
No. of days on which
702 Operations Research: Theory and Applications

the demands occurred : 5 9 16 38 23 9 calculation should include the total cost of operating this inven-
Past experience indicates that there are fluctuations in the lead tory rule for 10 days.
time for procurement of items. The following data are available 19. The materials manager of a company is interested in deter-
from the records for the last 30 orders: mining the reorder point for an item, the pattern of demand for
which is as given below:
Lead time (weeks) : 1 2 3
No. of times the specified
No. of Units No. of Days on Which the
lead time occurred : 18 7 5
per Day Demand Occurred
The management policy is to ensure that the proportion of
stockouts should not exceed 5 per cent. Illustrate how the 0 5
simulation approach can be used to determine the reorder point. 1 9
(Analysis for 20 orders is adequate.) 2 16
18. A company trading in motor vehicle spares wishes to determine 3 38
the level of stock it should carry for the items in its range. 4 23
Demand is not certain and there is a lead time for stock 5 9
replenishment of one item N X. The following information is
obtained: Past experience indicates that there are fluctuations in the lead
time for procurement of the item. The following data are available
Demand (units/day) : 3 4 5 6 7
from records for the last 30 orders:
Probability : 0.10 0.20 0.30 0.30 0.10
Carrying cost (per unit per day) = 20 paise. Lead Time No. of Times the Specified
(weeks) Lead Time Occurred
Ordering cost (per order) = Rs 5
Lead time for replenishment = 3 days 1 181
2 7
Stock in hand at the beginning of the simulation exercise was
3 5
20 units.
You are required to carry out a simulation run over a period The management policy is to ensure that the proportion of
of ten days with the objective of evaluating the following inven- stockouts should not exceed 5 per cent. Illustrate how the
tory rule: Order 15 units when present inventory plus any simulation approach can be used to determine the reorder point.
outstanding order falls below 15 units. (Analysis for 20 orders is adequate.) [Delhi Univ., MBA, 2005]
The sequence of random numbers used is: 0, 9, 1, 1, 5, l, 8,
6, 3, 5, 7, 1, 2, 9, using the first number for day one. Your

CHAPTER SUMMARY
Simulation is a powerful and intuitive technique and uses computer to simulate the operation of an entire system or process.
Random numbers are generated using a probability distribution to generate various outcomes over a period of time. These
outcomes provide at a glance view of different configurations of the system at a least cost in comparison of actually operating
the system. Hence, many alternative system configurations can be investigated and compared before selecting the most
appropriate one to use.
Simulation approach has applications to a wide variety of areas such as queuing system, inventory system, replacement, PERT
projects, financial risk analysis, health care system, distribution system, etc.
Spread sheet software is increasingly being used to perform basic computer simulations. The availability of such a software
enables decision makers to use simulation approach for solving real-life decision problems.

CHAPTER CONCEPTS QUIZ

True or False
1. The purpose of using simulation technique is to reduce the cost 8. Biased random sampling is made from among alternative which
of experiment on a real-life model. have equal probability.
2. The results of simulation experiment should be viewed as exact. 9. To assign random numbers in Monte-Carlo simulation, it is
3. One of the causes of simulation analysis failure is incomplete necessary to assign the particular appropriate random numbers.
mix of essential skills. 10. Simulation should not be applied in all cases because it provides
4. The step required for simulation approach in solving a problem at best approximate solution to problem.
is to design an experiment.
5. The general purpose system simulation language needs a set Fill in the Blanks
of equation to describe a system.
11. Mathematical models can not be ________ to destroy its
6. Simulation is defined as a technique that uses computer. acceptability as a reasonable representation of a system under
7. Analytical results are taken into consideration before a simula- study.
tion study so as to identify suitable values of the system 12. As the complexity of a model increases, simulation seeks to
parameters. ________ the uncertainty in the model.
 Simulation 703

13. Simulation is the process of a model of a real system and 27. Biased random sampling is made from among alternatives which
conducting ________. have
14. Simulation is an approach for reproducing the processes by (a) equal probability
which ________ and change are created in a computer. (b) unequal probability
15. Determining whether the model is internally correct in a logical (c) probability which do not sum to 1
and programming sense called ________. (d) none of the above
16. The random numbers generated by a computer software are 28. Large complicated simulation models are appreciated because
uniformly distributed fractions between ________ and ________. (a) their average costs are not well-defined
17. Using simulation for queuing problem would be appropriate if the (b) it is difficult to create the appropriate events
________ follows a Poisson distribution. (c) they may be expensive to write and use as an experimental
18. Special-purpose simulation languages includes ________ and device
________. (d) all of the above
19. The Monte-Carlo method of simulation is developed through the 29. Simulation should not be applied in all cases because it
use of ________ and ________. (a) requires considerable talent for model building and exten-
20. Validation is the process of ________ a model to the real system sive computer programming efforts
that it represents to make sure that it is ________. (b) consumes much computer time
(c) provides at best approximate solution to problem
Multiple Choice (d) all of the above
30. Simulation is defined as
21. An advantage of simulation as opposed to optimization is that
(a) a technique that uses computers
(a) several options of measure of performance can be exam-
(b) an approach for reproducing the processes by which
ined
events by chance and changes are created in a computer
(b) complex real-life problems can be studied
(c) it is applicable in cases where there is an element of (c) a procedure for testing and experimenting on models to
randomness in a system answer what if . . ., then so and so . . . types of questions
(d) all of the above (d) all of the above
22. The purpose of using simulation technique is to 31. The general purpose system simulation language
(a) imitate a real-world situation (a) requires programme writing
(b) understand properties and operating characteristics of (d) does not require programme writing
complex real-life problems (c) requires predefined coding forms
(c) reduce the cost of experiment on a model of real situation (d) needs a set of equations to describe a system
(d) all of the above 32. Special simulation languages are useful because they
23. Which of the following is not the special purpose simulation (a) reduce programme preparation time and cost
language (b) have the capability to generate random variables
(a) BASIC (b) GPSS (c) require no prior programming knowledge
(c) GASP (d) SIMSCRIPT
(d) all of the above
24. As simulation is not an analytical model, therefore, the result of 33. Few causes of simulation analysis failure are
simulation must be viewed as
(a) inadequate level of user participation
(a) unrealistic (b) exact
(c) approximation (d) simplified (b) inappropriate levels of detail
25. While assigning random numbers in Monte Carlo simulation, it is (c) incomplete mix of essential skills
(a) not necessary to assign the exact range of random number (d) all of the above
interval as the probability 34. To make simulation more popular, we need to avoid
(b) necessary to develop a cumulative probability distribution (a) large cost over runs
(c) necessary to assign the particular appropriate random (b) prolonged delays
numbers (c) user dissatisfaction with simulation results
(d) all of the above
(d) all of the above
26. Analytical results are taken into consideration before a simula- 35. The important step required for simulation approach in solving
tion study so as to a problem is to
(a) identify suitable values of the system parameters
(a) test and validate the model
(b) determine the optimal decision
(b) design the experiment
(c) identify suitable values of decision variables for the specific
choices of system parameters (c) conduct the experiment
(d) all of the above (d) all of the above

Answers to Quiz
1. T 2. F 3. T 4. T 5. F 6. T 7. F 8. F 9. F 10. T
11. manipulated 12. replicate 13. designing, experiments 14. events of chance 15. internal validity
16. zero, one 17. arrival rate 18. GPSS, BASIC 19. probability distribution, random number
20. Comparing, accurate
21. (d) 22. (d) 23. (a) 24. (c) 25. (b) 26. (c) 27. (b) 28. (c) 29. (d) 30. (d) 31. (b)
32. (d) 33. (d) 34. (d) 35. (d)