LESSON

15
SIMULATION

CONTENTS
15.0 Aims and Objectives
15.1 Introduction
15.2 Advantages and Disadvantages of Simulation
15.3 Monte Carlo Simulation
15.4 Simulation of Demand Forecasting Problem
15.5 Simulation of Queuing Problems
15.6 Simulation of Inventory Problems
15.7 Let us Sum Up
15.8 Lesson-end Activities
15.9 Keywords
15.10 Questions for Discussion
15.11 Terminal Questions
15.12 Model Answers to Questions for Discussion
15.13 Suggested Readings

15.0 AIMS AND OBJECTIVES

This is the last lesson of the QT which will discuss about the Mathematical analysis and
mathematical technique simulation technique is considered as a valuable tool because
wide area of applications.

15.1 INTRODUCTION
In the previous chapters, we formulated and analyzed various models on real-life problems.
All the models were used with mathematical techniques to have analytical solutions. In
certain cases, it might not be possible to formulate the entire problem or solve it through
mathematical models. In such cases, simulation proves to be the most suitable method,
which offers a near-optimal solution. Simulation is a reflection of a real system,
representing the characteristics and behaviour within a given set of conditions.
In simulation, the problem must be defined first. Secondly, the variables of the model are
introduced with logical relationship among them. Then a suitable model is constructed.
After developing a desired model, each alternative is evaluated by generating a series of
values of the random variable, and the behaviour of the system is observed. Lastly, the
results are examined and the best alternative is selected the whole process has been
summarized and shown with the help of a flow chart in the Figure 90.
Quantitative Techniques Simulation technique is considered as a valuable tool because of its wide area of application.
for Management
It can be used to solve and analyze large and complex real world problems. Simulation
provides solutions to various problems in functional areas like production, marketing,
finance, human resource, etc., and is useful in policy decisions through corporate planning
models. Simulation experiments generate large amounts of data and information using a
small sample data, which considerably reduces the amount of cost and time involved in
the exercise.
For example, if a study has to be carried out to determine the arrival rate of customers at
a ticket booking counter, the data can be generated within a short span of time can be
used with the help of a computer.

Problem Definition

Introduction of Variables

Construction of Simulation Model

Testing of variables with values

Simulate

Examination of results Not Acceptable

Not Acceptable
Acceptable
Selection of best alternative

Figure 15.1: Simulation Process

15.2 ADVANTAGES AND DISADVANTAGES OF

SIMULATION
Advantages
l Simulation is best suited to analyze complex and large practical problems when it is
not possible to solve them through a mathematical method.
l Simulation is flexible, hence changes in the system variables can be made to select
the best solution among the various alternatives.
l In simulation, the experiments are carried out with the model without disturbing the
system.
l Policy decisions can be made much faster by knowing the options well in advance
and by reducing the risk of experimenting in the real system.

Disadvantages
l Simulation does not generate optimal solutions.
l It may take a long time to develop a good simulation model.
l In certain cases simulation models can be very expensive.
l The decision-maker must provide all information (depending on the model) about
the constraints and conditions for examination, as simulation does not give the
496 answers by itself.
 Simulation
15.3 MONTE CARLO SIMULATION
In simulation, we have deterministic models and probabilistic models. Deterministic
simulation models have the alternatives clearly known in advance and the choice is
made by considering the various well-defined alternatives. Probabilistic simulation model
is stochastic in nature and all decisions are made under uncertainty. One of the probabilistic
simulation models is the Monte Carlo method. In this method, the decision variables are
represented by a probabilistic distribution and random samples are drawn from probability
distribution using random numbers. The simulation experiment is conducted until the
required number of simulations are generated. Finally, the best course of action is selected
for implementation. The significance of Monte Carlo Simulation is that decision variables
may not explicitly follow any standard probability distribution such as Normal, Poisson,
Exponential, etc. The distribution can be obtained by direct observation or from past
records.
Procedure for Monte Carlo Simulation:
Step 1: Establish a probability distribution for the variables to be analyzed.
Step 2: Find the cumulative probability distribution for each variable.
Step 3: Set Random Number intervals for variables and generate random numbers.
Step 4: Simulate the experiment by selecting random numbers from random numbers
tables until the required number of simulations are generated.
Step 5: Examine the results and validate the model.

15.4 SIMULATION OF DEMAND FORECASTING

PROBLEM
Example 1: An ice-cream parlor's record of previous month’s sale of a particular variety
of ice cream as follows (see Table 15.1).
Table 15.1: Simulation of Demand Problem
Demand (No. of Ice-creams) No. of days
4 5
5 10
6 6
7 8
8 1

Simulate the demand for first 10 days of the month

Solution: Find the probability distribution of demand by expressing the frequencies in
terms of proportion. Divide each value by 30. The demand per day has the following
distribution as shown in Table 15.2.
Table 15.2: Probability Distribution of Demand
Demand Probability
4 0.17
5 0.33
6 0.20
7 0.27
8 0.03

Find the cumulative probability and assign a set of random number intervals to various
demand levels. The probability figures are in two digits, hence we use two digit random
numbers taken from a random number table. The random numbers are selected from
the table from any row or column, but in a consecutive manner and random intervals are
set using the cumulative probability distribution as shown in Table 15.3. 497
Quantitative Techniques Table 15.3: Cumulative Probability Distribution
for Management
Demand Probability Cumulative Probability Random Number Interval
4 0.17 0.17 00-16
5 0.33 0.50 17-49
6 0.20 0.70 50-69
7 0.27 0.97 70-96
8 0.03 1.00 97-99

To simulate the demand for ten days, select ten random numbers from random number
tables. The random numbers selected are,
17, 46, 85, 09, 50, 58, 04, 77, 69 and 74
The first random number selected, 7 lies between the random number interval 17-49
corresponding to a demand of 5 ice-creams per day. Hence, the demand for day one
is 5. Similarly, the demand for the remaining days is simulated as shown in Table 15.4.
Table 15.4: Demand Simulation
Day 1 2 3 4 5 6 7 8 9 10

Random Number 17 46 85 09 50 58 04 77 69 74
Demand 5 5 7 4 6 6 4 7 6 7

Example 2: A dealer sells a particular model of washing machine for which the probability
distribution of daily demand is as given in Table 15.5.
Table 15.5: Probability Distribution of Daily Demand
Demand/day - 0 1 2 3 4 5
Demand - 0.05 0.25 0.20 0.25 0.10 0.15

Find the average demand of washing machines per day.

Solution: Assign sets of two digit random numbers to demand levels as shown in
Table 15.6.
Table 15.6: Random Numbers Assigned to Demand
Demand Probability Cumulative Probability Random Number Intervals
0 0.05 0.05 00-04
1 0.25 0.30 05-29
2 0.20 0.50 30-49
3 0.25 0.75 50-74
4 0.10 0.85 75-84
5 0.15 1.00 85-99
Ten random numbers that have been selected from random number tables are 68, 47, 92,
76, 86, 46, 16, 28, 35, 54. To find the demand for ten days see the Table 15.7 below.
Table 15.7: Ten Random Numbers Selected

Trial No Random Number Demand / day

1 68 3
2 47 2
3 92 5
4 76 4
5 86 5
6 46 2
7 16 1
8 28 1
9 35 2
10 54 3

498 Total Demand 28

Average demand =28/10 =2.8 washing machines per day. Simulation

The expected demand /day can be computed as,

n

Expected demand per day = ∑P X

i =0
i i .......................(1)

where, pi = probability and xi = demand

= (0.05 × 0) + (0.25 × 1) + (0.20 × 2) + (0.25 × 3) + (0.1 × 4) + (0.15 × 5)
= 2.55 washing machines.
The average demand of 2.8 washing machines using ten-day simulation differs significantly
when compared to the expected daily demand. If the simulation is repeated number of
times, the answer would get closer to the expected daily demand.
Example 3: A farmer has 10 acres of agricultural land and is cultivating tomatoes on
the entire land. Due to fluctuation in water availability, the yield per acre differs. The
probability distribution yields are given below:
a. The farmer is interested to know the yield for the next 12 months if the same water
availability exists. Simulate the average yield using the following random numbers
50, 28, 68, 36, 90, 62, 27, 50, 18, 36, 61 and 21, given in Table 15.8.
Table 15.8: Simulation Problem
Yield of tomatoes per acre (kg) Probability
200 0.15
220 0.25
240 0.35
260 0.13
280 0.12

b. Due to fluctuating market price, the price per kg of tomatoes varies from Rs. 5.00
to Rs. 10.00 per kg. The probability of price variations is given in the Table 216
below. Simulate the price for next 12 months to determine the revenue per acre.
Also find the average revenue per acre. Use the following random numbers 53, 74,
05, 71, 06, 49, 11, 13, 62, 69, 85 and 69.
Table 15.9: Simulation Problem
Price per kg (Rs) Probability
5.50 0.05
6.50 0.15
7.50 0.30
8.00 0.25
10.00 0.15

Solution:
Table 15.10: Table for Random Number Interval for Yield
Yield of tomatoes Probability Cumulative Probability Random Number
per acre Interval

200 0.15 0.15 00 – 14

220 0.25 0.40 15 – 39
240 0.35 0.75 40 – 74
260 0.13 0.88 75 – 87
280 0.12 1.00 88 – 99 499
Quantitative Techniques Table 15.11: Table for Random Number Interval for Price
for Management
Price Per Kg Probability Cumulative Probability Random Number Interval
5.00 0.05 0.05 00 – 04
6.50 0.15 0.20 05 – 19
7.50 0.30 0.50 20 – 49
8.00 0.25 0.75 50 – 74
10.00 0.25 1.00 75 – 99

Table 15.12: Simulation for 12 months period

Month Yield Price

Revenue / Acre (4) = 2 × 3 (Rs)
(1) (2) (3)
1 240 8.00 1960
2 220 8.00 1760
3 240 6.50 1560
4 220 8.00 1760
5 250 6.50 1820
6 240 7.50 1800
7 220 6.50 1430
8 240 6.50 1560
9 220 8.00 1760
10 220 8.00 1760
11 240 10.00 2400
12 220 8.00 1760

Average revenue per acre = 21330 / 12

= Rs. 1777.50
Example 4: J.M Bakers has to supply only 200 pizzas every day to their outlet situated
in city bazaar. The production of pizzas varies due to the availability of raw materials and
labor for which the probability distribution of production by observation made is as follows:
Table 15.13: Simulation Problem

Production per day 196 197 198 199 200 201 202 203 204
Probability 0.06 0.09 0.10 0.16 0.20 0.21 0.08 0.07 0.03
Simulate and find the average number of pizzas produced more than the requirement
and the average number of shortage of pizzas supplied to the outlet.
Solution: Assign two digit random numbers to the demand levels as shown in
Table 15.14
Table 15.14: Random Numbers Assigned to the Demand Levels

Demand Probability Cumulative Probability No of Pizzas shortage

196 0.06 0.06 00-05
197 0.09 0.15 06-14
198 0.10 0.25 15-24
199 0.16 0.41 25-40
200 0.20 0.61 41-60
201 0.21 0.82 61-81
202 0.08 0.90 82-89
203 0.07 0.97 90-96
204 0.03 1.00 97-99
500
Selecting 15 random numbers from random numbers table and simulate the production Simulation
per day as shown in Table 15.15 below.
Table 15.15: Simulation of Production Per Day
Trial Number Random Number Production Per No of Pizzas over No of pizzas
day produced shortage
1 26 199 - 1
2 45 200 - -
3 74 201 1 -
4 77 201 1 -
5 74 201 1 -
6 51 200 - -
7 92 203 3 -
8 43 200 - -
9 37 199 - 1
10 29 199 - 1
11 65 201 1 -
12 39 199 - 1
13 45 200 - -
14 95 203 3 -
15 93 203 3 -
Total 12 4
The average number of pizzas produced more than requirement
= 12/15
= 0.8 per day
The average number of shortage of pizzas supplied
= 4/15
= 0.26 per day

Check Your Progress 15.1

1. Discuss the role of simulation in demand forecasting.

2. What is Monte Carlo simulation?
Notes: (a) Write your answer in the space given below.
(b) Please go through the lesson sub-head thoroughly you will get your
answers in it.
(c) This Check Your Progress will help you to understand the lesson
better. Try to write answers for them, but do not submit your answers
to the university for assessment. These are for your practice only.
_____________________________________________________________________
____________________________________________________________________________________________________________________
_____________________________________________________________________
__________________________________________________________________
_____________________________________________________________

15.5 SIMULATION OF QUEUING PROBLEMS

Example 5: Mr. Srinivasan, owner of Citizens restaurant is thinking of introducing
separate coffee shop facility in his restaurant. The manager plans for one service counter
for the coffee shop customers. A market study has projected the inter-arrival times at
the restaurant as given in the Table 15.16. The counter can service the customers at the
following rate: 501
Quantitative Techniques Table 15.16: Simulation of Queuing Problem
for Management
Inter–arrival times Service times
Time between two Service time
Probability Probability
consecutive arrivals (minutes) (minutes)
2 0.15 2 0.10
3 0.25 3 0.25
4 0.20 4 0.30
5 0.25 5 0.2
6 0.15 6 0.15
Mr. Srinivasan will implement the plan if the average waiting time of a customers in the
system is less than 5 minutes.
Before implementing the plan, Mr. Srinivasan would like to know the following:
i. Mean waiting time of customers, before service.
ii. Average service time.
iii. Average idle time of service.
iv. The time spent by the customer in the system.
Simulate the operation of the facility for customer arriving sample of 20 cars when the
restaurant starts at 7.00 pm every day and find whether Mr. Srinivasan will go for the
plan.
Solution: Allot the random numbers to various inter-arrival service times as shown in
Table 15.17.
Table 15.17: Random Numbers Allocated to Various Inter-Arrival Service Times
Sl. Random Inter Arrival Service Random Service Service Waiting Time
No. Number Arrival Time at Starts at Number Time Ends at
(Arrival) Time (service) (Min) Service
Customer
(Min) (Min)
1 87 6 7.06 7.06 36 4 7.10 - 6
2 37 3 7.09 7.10 16 3 7.13 1 -
3 92 6 7.15 7.15 81 5 7.20 - 2
4 52 4 7.19 7.20 08 2 7.22 1 -
5 41 4 7.23 7.23 51 4 7.27 - 1
6 05 2 7.25 7.27 34 3 7.30 2 -
7 56 4 7.29 7.30 88 6 7.36 1 -
8 70 5 7.34 7.36 88 6 7.42 2 -
9 70 5 7.39 7.42 15 3 7.45 3 -
10 07 2 7.41 7.45 53 4 7.49 4 -
11 86 6 7.47 7.49 01 2 7.51 2 -
12 74 5 7.52 7.52 54 4 7.56 - 1
13 31 3 7.55 7.56 03 2 7.58 1 -
14 71 5 8.00 8.00 54 4 8.04 1 2
15 57 4 8.04 8.04 56 4 8.08 - -
16 85 6 8.10 8.10 05 2 8.12 - 2
17 39 3 8.13 8.13 01 2 8.15 - 1
18 41 4 8.17 8.17 45 4 8.21 - 2
19 18 3 8.20 8.21 11 3 8.24 1 -
20 38 3 8.23 8.24 76 5 8.29 1 -
Total 83 72 20 17

i. Mean waiting time of customer before service = 20/20 = 1 minute

ii. Average service idle time = 17/20 = 0.85 minutes
iii. Time spent by the customer in the system = 3.6 + 1 = 4.6 minutes.
Example 6: Dr. Strong, a dentist schedules all his patients for 30 minute appointments.
Some of the patients take more or less than 30 minutes depending on the type of dental
work to be done. The following Table 15.18 shows the summary of the various categories
502 of work, their probabilities and the time actually needed to complete the work.
 Table 15.18: Simulation Problem Simulation

Category Time required (minutes) Probability of category

Filling 45 0.40
Crown 60 0.15
Cleaning 15 0.15
Extraction 45 0.10
Check-up 15 0.20

Simulate the dentist’s clinic for four hours and determine the average waiting time for
the patients as well as the idleness of the doctor. Assume that all the patients show up at
the clinic exactly at their scheduled arrival time, starting at 8.00 am. Use the following
random numbers for handling the above problem: 40,82,11,34,25,66,17,79.
Solution: Assign the random number intervals to the various categories of work as
shown in Table 15.19.
Table 15.19: Random Number Intervals Assigned to the Various Categories
Category of work Probability Cumulative probability Random Number Interval
Filling 0.40 0.40 00-39

Crown 0.15 0.55 40-54

Cleaning 0.15 0.70 55-69

Extraction 0.10 0.80 70-79

Check-up 0.20 1.00 80-99

Assuming the dentist clinic starts at 8.00 am, the arrival pattern and the service category
are shown in Table 15.20.
Table 15.20: Arrival Pattern of the Patients
Patient Number Scheduled Arrival Random Number Service category Service Time
1 8.00 40 Crown 60
2 8.30 82 Check-up 15
3 9.00 11 Filling 45
4 9.30 34 Filling 45
5 10.00 25 Filling 45
6 10.30 66 Cleaning 15
7 11.00 17 Filling 45
8 11.30 79 Extraction 45

Table 15.21: The arrival, departure patterns and patients’ waiting time are tabulated.

Time Event (Patient Number) Patient Number (Time to go) Waiting (Patient Number)
8.00 1 arrives 1 (60) -
8.30 2 arrives 1 (30) 2
9.00 1 departure, 3 arrives 2 (15) 3
9.15 2 depart 3 (45) -
9.30 4 arrive 3 (30) 4
10.00 3 depart, 5 arrive 4 (45) 5
10.30 6 arrive 4 (15) 5,6
10.45 4 depart 5 (45) 6
11.00 7 arrive 5 (30) 6,7
11.30 5 depart, 8 arrive 6 (15) 7,8
11.45 6 depart 7 (45) 8
12.00 End 7 (30) 8
503
Quantitative Techniques The dentist was not idle during the simulation period. The waiting times for the patients
for Management
are as given in Table 15.22 below.
Table 15.22: Patient's Waiting Time
Patient Arrival Time Service Starts Waiting time (minutes)
1 8.00 8.00 0
2 8.30 9.00 30
3 9.00 9.15 15
4 9.30 10.00 30
5 10.00 10.45 45
6 10.30 11.30 60
7 11.00 11.45 45
8 11.30 12.30 60
Total 285
The average waiting time of patients = 285/8
= 35.625 minutes.

15.6 SIMULATION OF INVENTORY PROBLEMS

A dealer of electrical appliances has a certain product for which the probability distribution
of demand per day and the probability distribution of the lead-time, developed by past
records are as shown in Table 15.23 and 10.24 respectively
Table 15.23: Probability distribution of lead demand
Demand (Units) 2 3 4 5 6 7 8 9 10
Probability 0.05 0.07 0.09 0.15 0.20 0.21 0.10 0.07 0.06
Table 15.24: Probability distribution of lead time
Lead Time (Days) 1 2 3 4
Probability 0.20 0.30 0.35 0.15
The various costs involved are,
Ordering Cost = Rs. 50 per order
Holding Cost = Rs.1 per unit per day
Shortage Cost = Rs. 20 per unit per day
The dealer is interested in having an inventory policy with two parameters, the reorder
point and the order quantity, i.e., at what level of existing inventory should an order be
placed and the number of units to be ordered. Evaluate a simulation plan for 35 days,
which calls for a reorder quantity of 35 units and a re-order level of 20 units, with a
beginning inventory balance of 45 units.
Solution: Assigning of random number intervals for the demand distribution and lead-
time distribution is shown in Tables 15.25 and 15.26 respectively.
Table 15.25: Random Numbers Assigned for Demand Per Day
Demand per day Probability Cumulative probability Random Number Interval
2 0.05 0.05 00-04
3 0.07 0.12 05-11
4 0.09 0.21 12-20
5 0.15 0.36 21-35
6 0.20 0.56 36-55
7 0.21 0.77 56-76
8 0.10 0.87 77-86
9 0.07 0.94 87-93
504
10 0.06 1.00 94-99
 Table 15.26: Random Numbers Assigned for Lead-time Simulation

Lead Time (Days) Probability Cumulative probability Random Number Interval

1 0.20 0.20 00-19
2 0.30 0.50 20-49
3 0.35 0.85 50-84
4 0.15 1.00 85-99

Table 15.27: Simulation Work-sheet for Inventory Problem (Case – 1)

Reorder Quantity = 35 units, Reorder Level = 20 units, Beginning Inventory = 45 units
Random
Random Lead Inventory Qty. Order- Short-
Number Holding
Day Number Demand Time at end of Recei- ing age
(Lead Cost
(Demand) (Days) day ved Cost Cost
Time)
0 - - - - 45 - - - -
1 58 7 - - 38 - - 38 -
2 45 6 - - 32 - - 32 -
3 43 6 - - 26 - - 26 -
4 36 6 73 3 20 - 50 20 -
5 46 6 - - 14 - - 14 -
6 46 6 - - 8 - - 8 -
7 70 7 - - 1 35 - 36 -
8 32 5 - - 31 - - 31 -
9 12 4 - - 27 - - 27 -
10 40 6 - - 21 - - 21 -
11 51 6 21 2 15 - 50 15 -
12 59 7 - - 8 - - 8 -
13 54 6 - - 37 35 - 37 -
14 16 4 - - 33 - - 33 -
15 68 7 - - 26 - - 26 -
16 45 6 45 2 20 - 50 20 -
17 96 10 - - 10 - - 10 -
18 33 5 - - 40 35 - 40 -
19 83 8 - - 32 - - 32 -
20 77 8 - - 24 - - 24 -
21 05 3 - - 21 - - 21 -
22 15 4 76 3 17 - 50 17 -
23 40 6 - - 11 - - 11 -
24 43 6 - - 5 - - 5 -
25 34 5 - - 35 35 - 35 -
26 44 6 - - 29 - - 29 -
27 89 9 96 4 20 - 50 20 -
28 20 4 - - 16 - - 16 -
29 69 7 - - 9 - - 9 -
30 31 5 - - 4 - - 4 -
31 97 10 - - 29 35 - 29 -
32 05 3 - - 26 - - 26 -
33 59 7 94 4 19 - 50 19 -
34 02 2 - - 17 - - 17 -
35 35 5 - - 12 - - 12 -
Total 300 768 - 505
Quantitative Techniques Table 15.28: Simulation Work-sheet for Inventory Problem (Case – II)
for Management
Reorder Quantity = 30 units, Reorder Level = 20 units, Beginning Inventory = 45 units
Random
Random Lead Inventory
Number Qty. Ordering Holding Shortage
Day Number Demand Time at end of
(Lead Received Cost Cost Cost
(Demand) (Days) day
Time)
0 - - - - 45 - - - -
1 58 7 - - 38 - - 38 -
2 45 6 - - 32 - - 32 -
3 43 6 - - 26 - - 26 -
4 36 6 73 3 20 - 50 20 -
5 46 6 - - 14 - - 14 -
6 46 6 - - 8 - - 8 -
7 70 7 - - 31 30 - 31 -
8 32 5 - - 29 - - 29 -
9 12 4 - - 25 - - 25 -
10 40 6 - - 19 - 50 19 -
11 51 6 21 2 13 - - 13 -
12 59 7 - - 38 - - 38 -
13 54 6 - - 32 30 - 32 -
14 16 4 - - 21 - - 21 -
15 68 7 - - 21 - - 21 -
16 45 6 45 2 15 - 50 15 -
17 96 10 - - 5 - - 5 -
18 33 5 - - 30 - - 30 -
19 83 8 - - 22 - - 22 -
20 77 8 - - 14 - 50 14 -
21 05 3 - - 11 - - 11 -
22 15 4 76 3 7 - - 7 -
23 40 6 - - 31 30 - 31 -
24 43 6 - - 14 - - 14 -
25 34 5 - - 20 - 50 20 -
26 44 6 - - 14 - - 14 -
27 89 9 96 4 5 - - 5 -
28 20 4 - - 1 - - 1 -
29 69 7 - - 24 30 - 24 -
30 31 5 - - 19 - 50 19 -
31 97 10 - - 9 - - 9 -
32 05 3 - - 6 - - 6 -
33 59 7 94 4 0 - - - 20
34 02 2 - - 28 30 - 28 -
35 35 5 - - 23 - - 23 -
Total 300 683 20
The simulation of 35 days with an inventory policy of reordering quantity of 35 units at
the time of inventory level at the end of day is 20 units, as worked out in Table 10.27. The
table explains the demand inventory level, quantity received, ordering cost, holding cost
506 and shortage cost for each day.
Completing a 35 day period, the costs are Simulation

Total ordering cost = (6 × 50) = Rs 300.00

Total holding cost = Rs. 768.00
Since the demand for each day is satisfied, there is no shortage cost.
Therefore, Total cost = 300 + 768
= Rs. 1068.00
For a different set of parameters, with a re-order quantity of 30 units and the same re-
order level of 20 units, if the 35-day simulation is performed, we get the total of various
costs as shown in Table 10.28.
Total ordering cost = 6 × 50 = Rs. 300.00
Total holding cost = Rs. 683.0
Total shortage cost = Rs. 20.00
Therefore,
Total cost = 300 + 683 + 20
= Rs. 1003.00
If we analyze the combination of both the parameters, Case II has lesser total cost than
Case I. But at the same time, it does not satisfy the demand on 33rd day, that might cause
customer dissatisfaction which may lead to some cost.
In this type of problems, the approach with various combinations of two parameter
values is simulated a large number of times to find the total cost of each experiment,
compare the total cost and select the optimum alternative, i.e., that one which incurs the
lowest cost.

Check Your Progress 15.2

1. Explain how computer make ideal aides in simulating complex tasks.

2. What are the two types of computer programming languages that are available
to facilitate the simulation process?
3. Why in the computer necessary in conducting a real world simulation.
4. Do you think the application of simulation will enhance strongly in the coming
10 years.
5. Draw a flow diagram for the simulation of electric-maintenance by the power
corporation of India Ltd.
Notes: (a) Write your answer in the space given below.
(b) Please go through the lesson sub-head thoroughly you will get your
answers in it.
(c) This Check Your Progress will help you to understand the lesson
better. Try to write answers for them, but do not submit your answers
to the university for assessment. These are for your practice only.
_____________________________________________________________________
____________________________________________________________________________________________________________________
_____________________________________________________________________
__________________________________________________________________
__________________________________________________________________
507