Computer Simulation for Business

Computer Simulation for Business Applications BUDT 758K: Spring D Term 2013

Prof. Sean Barnes Dept. of Decision, Operations, and Information Technologies Robert H. Smith School of Business University of Maryland, College Park

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Agenda – March 26 •  Syllabus + Course Website •  Introduction to Simulation •  Probability & Statistics Review

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SYLLABUS + CANVAS

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Kelton et al.: Chapters 1, 13 Banks et al.: Chapter 1

INTRODUCTION TO SIMULATION

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What is Simulation?

•  The imitation of the operation of a real-world process or system over time, usually via computer (in silico), in order to predict outcomes or evaluate alternative interventions •  Many applications!

–  Manufacturing processes –  Service operations (e.g., hospitals, grocery stores, restaurants, banks, airports) –  Transportation systems and logistics –  Computer networks –  Business processes (e.g., document processing) –  Chemical and biological processes –  Military combat and logistics

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Why Simulate?

•  It is either infeasible, unethical, disruptive, dangerous or extremely costly to experiment with the real system •  The real system is too complex to describe by a set of mathematical equations •  A set of mathematical equations describing the real system are too difficult to solve or validate •  Simulations usually offer an easier, less expensive, faster, and safer alternative to evaluate real systems under an extensive variety of circumstances

Adapted from Naylor, Thomas H., Joseph L. Balintfy, Donald S. Burdick, and Kong Chu, Computer Simulation Techniques, John Wiley & Sons, Inc., 1966, pp. 6-7

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Benefits of Simulation

•  Model Flexibility

–  Typically fewer assumptions than analytical models –  Can easily account for variability of system processes

•  Increasingly more capable technology

–  Advances in computing speeds and costs, which means we can get more answers sooner –  Advances in simulation software, which means we can model more...