MPEN 584: Optimization and Simulation

Bellman’s Principle of Optimality.

The optimal solution to a dynamic optimization problem can be found by

combining the optimal solutions to its sub-problems.

Alternatively:

An optimal policy (a sequence of decisions) has the property that whatever

the initial state and decisions are, the remaining decisions must constitute an
optimal policy with regard to state resulting from the first decision.

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Bellman-Ford algorithm. A single-source shortest path algorithm that finds the
shortest path from a given source vertex to all other vertices in a graph. It starts
with an assumption that the shortest distance to all vertices from the source vertex
is infinity. Through a series of iterations, it updates these distances by relaxing the
edges—finding shorter paths whenever possible, in what is known as relaxation.

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Greedy algorithms
Make short-sighted, ―best guess‖ decisions
Required less time/work
Provide approximate solutions

Dynamic planning
Examines all possible solutions
Requires more time/work
Guarantees optimal solution

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 SIMULATION

Techniques for using computers to imitate the operations of various

kinds of real-world facilities or processes.

The facility or process of interest is usually called a system, and in

order to study it scientifically we often have to make a set of
assumptions about how it works.

These assumptions, which usually take the form of mathematical or

logical relationships, constitute a model that is used to try to gain
some understanding of how the corresponding system behaves.

A discrete system is one for which the state variables change instantaneously at
separated points in time.

A continuous system is one for which the state variables change continuously with
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respect to time.
If the relationships that compose the model are simple enough, it
may be possible to use mathematical methods (such as algebra,
calculus, or probability theory) to obtain exact information on
questions of interest; this is called an analytic solution.

However, most real-world systems are too complex to allow

realistic models to be evaluated analytically, and these models must
be studied by means of simulation.

In a simulation we use a computer to evaluate a model numerically,

and data are gathered in order to estimate the desired true
characteristics of the model.

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How to study a System

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 Applications of Simulation
Application areas for simulation are numerous and diverse. Below is a list
of some particular kinds of problems for which simulation has been found
to be a useful and powerful tool:

• Designing and analyzing manufacturing systems

• Evaluating military weapons systems or their logistics requirements
• Determining hardware requirements or protocols for communications
networks
• Determining hardware and software requirements for a computer system
• Designing and operating transportation systems such as airports,
freeways, ports, and subways
• Evaluating designs for service organizations such as call centers, fast-food
restaurants, hospitals, and post offices
• Reengineering of business processes
• Analyzing supply chains
• Determining ordering policies for an inventory system
• Analyzing mining operations 8
 Simulation: Advantages
• Policies, procedures, decision rules, information flows can be explored without
disrupting the real system.

• New hardware designs, physical layouts, transportation systems, protocols,

computer systems, and network architectures can be tested without committing
resources.

• Hypotheses about how or why a phenomenon occurs can be tested for feasibility

• Time can be compressed or expanded (Slow-down or Speed-up)

• Insight can be obtained about the interaction of variables

• Bottleneck analysis can be performed to detect excessive delays

• Simulation can help to understand how the system operates rather than how
people think the system operates

• What if‖ questions can be answered 9

 Simulation: Disadvantages

• Model building requires training – it is like an art (compare model building

with programming).

• Simulation results can be difficult to interpret (most outputs are essentially

random variables; thus, not simple to decide whether output is randomness
or system behavior).

• Simulation can be time consuming and expensive (Skimping in time and

resources could lead to useless/wrong results).

• The disadvantages are offset as follows: Simulation packages contain models

that only need input data; Simulation packages contain output-analysis
capabilities; sophistication in computer technology improves simulation
times; for most of the real-world problems there are no closed form
solutions.

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Static vs. Dynamic Simulation Models. A static simulation model is a
representation of a system at a particular time, or one that may be used to represent
a system in which time simply plays no role; examples of static simulations are
certain Monte Carlo models. On the other hand, a dynamic simulation model
represents a system as it evolves over time, such as a conveyor system in a factory.

Deterministic vs. Stochastic Simulation Models. If a simulation model does not

contain any probabilistic (i.e., random) components, it is called deterministic; a
complicated (and analytically intractable) system of differential equations
describing a chemical reaction might be such a model. In deterministic models, the
output is ―determined‖ once the set of input quantities and relationships in the
model have been specified, even though it might take a lot of computer time to
evaluate what it is. Many systems, however, must be modeled as having at least
some random input components, and these give rise to stochastic simulation
models. Most queueing and inventory systems are modeled stochastically.
Stochastic simulation models produce output that is itself random, and must
therefore be treated as only an estimate of the true characteristics of the model; this
is one of the main disadvantages of simulation. 11
Continuous vs. Discrete Simulation Models. Discrete and continuous simulation
models are defined analogously to discrete and continuous systems. The decision
whether to use a discrete or a continuous model for a particular system depends on
the specific objectives of the study.

For example, a model of traffic flow on a freeway would be discrete if the

characteristics and movement of individual cars are important. Alternatively, if the
cars can be treated ―in the aggregate,‖ the flow of traffic can be described by
differential equations in a continuous model.

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Steps in a simulation study

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1. Formulate the problem and plan the study.
a. Problem of interest is stated by manager.
• Problem may not be stated correctly or in quantitative terms.
• An iterative process is often necessary.

b. One or more kickoff meetings for the study are conducted, with the project
manager, the simulation analysts, and subject-matter experts (SMEs) in
attendance.

The following things are discussed:

• Overall objectives of the study

• Specific questions to be answered by the study (required to decide level of
model detail)
• Performance measures that will be used to evaluate the efficacy of different
system configurations
• Scope of the model
• System configurations to be modeled (required to decide generality of
simulation program)
• Time frame for the study and the required resources
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c. Select the software for the model
2. Collect data and define a model.
a. Collect information on the system structure and operating procedures.
• No single person or document is sufficient.
• Some people may have inaccurate information—make sure that true SMEs are identified.
• Operating procedures may not be formalized.
b. Collect data (if possible) to specify model parameters and input probability distributions
c. Delineate above information and data in a written assumptions document
d. Collect data (if possible) on the performance of the existing system (for validation purposes in step
6).
e. Choosing the level of model detail, which is an art, should depend on the following:
• Project objectives
• Performance measures
• Data availability
• Credibility concerns
• Computer constraints
• Opinions of SMEs
• Time and money constraints
f. There should not be a one-to-one correspondence between each element of the model and the
corresponding element of the system.
g. Start with a ―simple‖ model and embellish it as needed. Modeling each aspect of the system will
seldom be required to make effective decisions, and might result in excessive model execution time, in
missed deadlines, or in obscuring important system factors.
h. Interact with the manager (and other key project personnel) on a regular Basis.

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3. Is the assumptions document valid?
a. Perform a structured walk-through of the assumptions document before an
audience of managers, analysts, and SMEs. This will
• Help ensure that the model’s assumptions are correct and complete
• Promote interaction among the project members
• Promote ownership of the model
• Take place before programming begins, to avoid significant reprogramming
Later

4. Construct a computer program and verify.

a. Program the model in a programming language (e.g., C, C++, or Java) or in
simulation software (e.g., Arena, ExtendSim, Flexsim, and ProModel).
Benefits of using a programming language are that one is often known, they offer
greater program control, they have a low purchase cost, and they may result in a
smaller model-execution time. The use of simulation software, on the other hand,
reduces programming time and results in a lower project cost.
b. Verify (debug) the simulation computer program.

5. Make pilot runs.

a. Make pilot runs for validation purposes in step 6.
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6. Is the programmed model valid?
a. If there is an existing system, then compare model and system (from step 2)
performance measures for the existing system .
b. Regardless of whether there is an existing system, the simulation analysts and
SMEs should review the model results for correctness.
c. Use sensitivity analyses to determine what model factors have a significant
impact on performance measures and, thus, have to be modeled carefully.

7. Design experiments.
a. Specify the following for each system configuration of interest:
• Length of each simulation run
• Length of the warm-up period, if one is appropriate
• Number of independent simulation runs using different random numbers —
facilitates construction of confidence intervals

8. Make production runs.

a. Production runs are made for use in step 9.

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9. Analyze output data.

a. Two major objectives in analyzing output data are to

• Determine the absolute performance of certain system configurations
• Compare alternative system configurations in a relative sense

10. Document, present, and use results.

a. Document assumptions (see step 2), computer program, and study’s results
for use in the current and future projects.
b. Present study’s results.
• Use animation to communicate model to managers and other people who are
not familiar with all the model details.
• Discuss model building and validation process to promote credibility.
• Results are used in decision-making process if they are both valid and
credible.

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