Operations Management: Creating Value Along the Supply Chain, 7th Edition

Chapter S13. Operational Decision-Making Tools: Simulation

In this supplement, you will learn about . . .

• Monte Carlo Simulation

• Computer Simulation with Excel

• Areas of Simulation Application

Simulation is popular because it can be applied to virtually any type of problem. It can frequently be used when there is no other applicable quantitative method; sometimes it is the technique of last resort for a problem. It is a modeling approach primarily used to analyze probabilistic problems. It does not normally provide a solution; instead it provides information that is used to make a decision.

Much of the experimentation in space flight was conducted using physical simulation that re-created the conditions of space. Conditions of weightlessness were simulated using rooms filled with water. Other examples include wind tunnels that simulate the conditions of flight and treadmills that simulate automobile tire wear in a laboratory instead of on the road.

• Simulation: a mathematical and computer modeling technique for replicating real-world problem situations.

This supplement is concerned with another type of simulation, computerized mathematical simulation. In this form of simulation, systems are replicated with mathematical models, which are analyzed with a computer. This type of simulation is very popular and has been applied to a wide variety of operational problems.

MONTE CARLO SIMULATION

Some problems are difficult to solve analytically because they consist of random variables represented ...