Simulation Modeling and Analysis.

Abstract

Simulation modeling and analysis is a powerful suite of techniques for addressing a broad array of decision analytical problems. In this chapter, we highlight the most important aspects of the topic, taking advantage of prior development of discrete and continuous stochastic models in this book. Beginning with discussing model building for simulation analysis relevant in various application areas, we review the fundamentals of simulation in terms of random variates generation, model validation, and simulation output analysis. We consider manufacturing and service systems, where we are concerned with the optimal layout and configuration of manufacturing operations or service delivery setup for best-performance characteristics, or sensitivity analysis from changes made in layout or changes appearing due to breakdowns. The second application domain we consider is that of communication and transportation networks, where flow of entities is on a fixed infrastructure designed to meet customer demand, while satisfying 'physical' constraints of the system. Therefore, capability analysis is often the motivation of evaluating such systems for meeting demand as well as quality of service delivered to customers. We finally consider two example application domains in banking and finance, one in asset valuation and allocation and the other in risk management. In the second part of the chapter, we delve into specialized topics of interest for a simulation study, such as variance reduction techniques, rare-event simulation, and stochastic Kriging. For a more sophisticated use of simulation modeling and analysis, we developmodeling approaches for simulation of dynamic systems. Acknowledging that many decision analytics problems extend to assessing better or the best configurations of systems or ways of performing tasks, the chapter presents simulation-based optimization methodologies and techniques to address optimal decision-making problems. While we have initiated the chapter with several specific application domains where simulation modeling and analysis is extensively utilized, the entire chapter is interspersed with examples for making a stronger context for an analyst to benefit from the topics covered. This chapter is devoted to developing simulation modeling and analysis concepts and techniques to address decision analysis problems. Simulation modeling and analysis is a vast topic, and a powerful suite of techniques, for solving a broad array of problems. This c…