Lecture Operations management: Creating value along the supply chain (Canadian edition) - Chapter 13S

Chapter 13 supplement - Operational decision-making tools: Simulation. This chapter includes contents: Monte carlo simulation, computer simulation with excel, areas of simulation application.

OPERATIONS MANAGEMENT: Creating Value Along the Supply Chain, Canadian Edition Robert S Russell, Bernard W Taylor III, Ignacio Castillo, Navneet Vidyarthi CHAPTER 13 SUPPLEMENT Operational Decision-Making Tools: Simulation Supplement 13-1 Lecture Outline —Monte Carlo Simulation —Computer Simulation with Excel —Areas of Simulation Application Supplement 13-2 Simulation —Mathematical and computer modeling technique for replicating real-world problem situations —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 —Physical simulation —Space flights, wind tunnels, treadmills for tires —Mathematical-computerized simulation —Computer-based replicated models Supplement 13-3 Monte Carlo Simulation — Select numbers randomly from a probability distribution — Use these values to observe how a model performs over time — Random numbers each have an equal likelihood of being selected at random Supplement 13-4 Probability Distribution of Demand LAPTOPS DEMANDED PER WEEK, x FREQUENCY OF DEMAND PROBABILITY OF DEMAND, P(x) 20 40 20 10 10 0.20 0.40 0.20 0.10 0.10 100 1.00 Supplement 13-5 Roulette Wheel of Demand 90 x=4 80 x=0 20 x=3 x=2 x=1 60 Supplement 13-6 Generating Demand from Random Numbers DEMAND, x RANGES OF RANDOM NUMBERS, r 0-19 20-59 60-79 80-89 90-99 r = 39 Supplement 13-7 Random Number Table Supplement 13-8 15 Weeks of Demand WEEK 10 11 12 13 14 15 r 39 73 72 75 37 02 87 98 10 47 93 21 95 97 69 DEMAND (x) REVENUE (S) 2 4 4 4,300 8,600 8,600 8,600 4,300 12,900 17,200 4,300 17,200 4,300 17,200 17,200 8,600 = 31 $133,300 Supplement 13-9 Computing Expected Demand Estimated average demand = 31/15 = 2.07 laptops/week E(x) • • = (0.20)(0) + (0.40)(1) + (0.20)(2) + (0.10)(3) + (0.10)(4) = 1.5 laptops per week Difference between 1.5 and 2.07 is due to small number of periods analyzed (only 15 weeks) Steady-state result • average result which stays constant after enough trials Supplement 13-10 Random Numbers in Excel Supplement 13-11 Simulation in Excel Enter this formula in G6 and copy to G7:G20 Enter “=4300*G6” in H6 can copy to H7:H20 =AVERAGE(G6:G20) Generate random number for cells F6:F20 with the formula “=RAND()” in F6 and copying to F7:F20 Supplement 13-12 Simulation in Excel Spreadsheet “frozen” at row 16 to show first 10 weeks and last Supplement 13-13 Decision Making with Simulation This formula entered in G7 and copied to G8:G105 =G6*50 entered into cell L6 and copied to L7:L105 =VLOOKUP (F6,LOOKUP,2) in H6 and copied to H7:H105 Shortages computed by entering =MIN(G6-H6,0) in I6 and copying to I7:I105 Supplement 13-14 Decision Making with Simulation New formula for two laptops ordered per week Supplement 13-15 Areas of Simulation Application —Waiting Lines/Service —Complex systems for which it is difficult to develop analytical formulas —Determine how many registers and servers are needed to meet customer demand —Inventory Management —Traditional models make the assumption that customer demand is certain —Simulation is widely used to analyze JIT without having to implement it physically Supplement 13-16 Areas of Simulation Application —Production and Manufacturing Systems —Production scheduling, production sequencing, assembly line balancing, plant layout, and plant location analysis —Machine breakdowns typically occur according to some probability distributions —Capital Investment and Budgeting —Capital budgeting problems require estimates of cash flows, often resulting from many random variables —Simulation has been used to generate values of cash flows, market size, selling price, growth rate, and market share Supplement 13-17 Areas of Simulation Application —Logistics —Random variables include, distance, transport modes, shipping rates, and schedules —Allows analysis of different distribution channels —Service Operations —Police departments, fire departments, post offices, hospitals, court systems, airports —Complex operations where only simulation can be employed —Environmental and Resource Analysis —Impact of manufacturing plants, waste-disposal facilities, nuclear power plants, waste and population conditions, feasibility of alternative energy sources Supplement 13-18 COPYRIGHT Copyright © 2014 John Wiley & Sons Canada, Ltd All rights reserved Reproduction or translation of this work beyond that permitted by Access Copyright (The Canadian Copyright Licensing Agency) is unlawful Requests for further information should be addressed to the Permissions Department, John Wiley & Sons Canada, Ltd The purchaser may make back-up copies for his or her own use only and not for distribution or resale The author and the publisher assume no responsibility for errors, omissions, or damages caused by the use of these programs or from the use of the information contained herein  ... Supplement 1 3-6 Generating Demand from Random Numbers DEMAND, x RANGES OF RANDOM NUMBERS, r 0-1 9 2 0-5 9 6 0-7 9 8 0-8 9 9 0-9 9 r = 39 Supplement 1 3-7 Random Number Table Supplement 1 3-8 15 Weeks of... tires —Mathematical-computerized simulation —Computer-based replicated models Supplement 1 3-3 Monte Carlo Simulation — Select numbers randomly from a probability distribution — Use these values... back-up copies for his or her own use only and not for distribution or resale The author and the publisher assume no responsibility for errors, omissions, or damages caused by the use of these