Business Intelligence and Analytics:

Systems for Decision Support

(10th Edition)

Chapter 10:
Modeling and Analysis: Heuristic
Search Methods and Simulation
 Learning Objectives
 Explain the basic concepts of simulation
and heuristics, and when to use them
 Understand how search methods are used
to solve some decision support models
 Know the concepts behind and
applications of genetic algorithms
 Explain the differences among algorithms,
blind search, and heuristics
(Continued…)
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 Learning Objectives
 Understand the concepts and applications
of different types of simulation
 Explain what is meant by system
dynamics, agent-based modeling, Monte
Carlo, and discrete event simulation
 Describe the key issues of model
management

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 Opening Vignette
System Dynamics Allows Fluor
Corporation to Better Plan for Project
and Change Management
 Background
 Problem description
 Proposed solution
 Results
 Answer & discuss the case questions...
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 Questions for
the Opening Vignette
1. Explain the use of system dynamics as a
simulation tool for solving complex problems.
2. In what ways was it applied in Fluor Corporation
to solve complex problems?
3. How does a what-if analysis help a decision
maker to save on cost?
4. In your own words, explain the factors that
might have triggered the use of system
dynamics to solve change management
problems in Fluor Corporation…
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 Problem-Solving Search Methods
 Search: choice phase of decision making
 Search is the process of identifying the
best possible solution / course of action
[under limitations such as time, …]
 Search techniques include
 analytical techniques,
 algorithms,
 blind searching, and
 heuristic searching
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 Problem-Solving Search Methods

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 Problem-Solving Search Methods
- Algorithmic/Heuristic
 Cuts the search space
 Gets satisfactory solutions
more quickly and less
expensively
 Finds good enough feasible
solutions to complex problems
 Heuristics can be
 Quantitative
 Qualitative (in ES)

 Traveling Salesman Problem

see the example next >>>
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 Traveling Salesman Problem
 What is it?
 A traveling salesman must visit customers in several
cities, visiting each city only once, across the country.
Goal: Find the shortest possible route.
 Total number of unique routes (TNUR):
TNUR = (1/2) (Number of Cities – 1)!
Number of Cities TNUR
5 12
6 60
9 20,160
20 1.22 1018

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 Traveling Salesman Problem

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 Traveling Salesman Problem
Rule 1: Starting from home base, go to the closest city

Rule 2: Always follow an exterior route

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 Application Case 10.1
Chilean Government Uses Heuristics to
Make Decisions on School Lunch
Providers
Questions for Discussion
1. What were the main challenges faced by
JUNAEB?
2. What operation research methodologies were
employed in achieving homogeneity across
territorial units?
3. What other approaches could you use in this
case study?
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 When to Use Heuristics
 When to Use Heuristics?
 Inexact or limited input data
 Complex reality
 Reliable, exact algorithm not available
 Computation time excessive
 For making quick decisions

 Limitations of Heuristics!
 Cannot guarantee an optimal solution
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 Modern Heuristic Methods
 Tabu search
 Intelligent search algorithm

 Genetic algorithms
 Survival of the fittest

 Simulated annealing
 Analogy to Thermodynamics

 Ant colony and other Meta-heuristics

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 Genetic Algorithms
 It is a popular heuristic search technique
 Mimics the biological process of evolution
 Genetic algorithms
 Software programs that “learn/search” in evolutionary
manner, similar to the way biological systems evolve
 An efficient, domain-independent search heuristic
for a broad spectrum of problem domains
 Main theme: Survival of the fittest
 Moving toward better and better solutions by letting
only the fittest parents create the future generations
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 Evolutionary Algorithm

10010110 10010110
01100010 Elitism 01100010
10100100 10100100
10011001 10011101
01111101 01111001
... Selection Reproduction ...
... . Crossover ...
... . Mutation ...
... ...
Current Next
generation generation

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 GA Structure and GA Operators
Start

 Each candidate solution is

called a chromosome Represent problem’s
chromosome structure

 A chromosome is a string of
genes Generate initial solutions
(the initial generation)

 Chromosomes can copy

themselves, mate, and
mutate via evolution Next
generation
of solutions
Test:
Is the solution
satisfactory?
Yes Stop -
Deploy the
solution

 In GA we use specific
genetic operators No

 Reproduction Elites Select elite solutions; carry

them into next generation
 Crossover
 Mutation Offspring Select parents to reproduce;
apply crossover and mutation

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 Genetic Algorithms
- Example: The Vector Game
 Description of the Vector Game
 Identifying a string of 5 binary digits
 Default Strategy: Random Trial and Error
 Improved Strategy: Use of Genetic
Algorithms
 In an iterative fashion, using genetic
algorithm process and genetic operators, find
the opponent’s digit sequence
 See your book for functional details
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 A Classic GA Example:
The Knapsack Problem
Item: 1 2 3 4 5 6 7
Benefit: 5 8 3 2 7 9 4
Weight: 7 8 4 10 4 6 4
 Knapsack holds a maximum of 22 pounds
 Need to fill it for maximum benefit (one per item)
 Solutions take the form of a string of 1’s
Example Solution: 1 1 0 0 1 0 0
Means choose items 1, 2, 5:
 Weight = 21, Benefit = 20
 Evolver solution works in
Microsoft Excel… 
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 Define the
objective
function and
constraint(s)
  Identify the
decision variables
and their
characteristics

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  Observe and
analyze the
results

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  Observe and
analyze the
results

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 The Knapsack Problem at Evolver

 Monitoring
the solution
generation
process…

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 Genetic Algorithms
 Limitations of Genetic Algorithms
 Does not guarantee an optimal solution (often settles
in a sub optimal solution / local minimum)
 Not all problems can be put into GA formulation
 Development and interpretation of GA solutions
requires both programming and statistical skills
 Relies heavily on the random number generators
 Locating good variables for a particular problem and
obtaining the data for the variables is difficult
 Selecting methods by which to evolve the system
requires experimentation and experience
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 Genetic Algorithm Applications
 Dynamic process control
 Optimization of induction rules
 Discovery of new connectivity topologies (NNs)
 Simulation of biological models of behavior
 Complex design of engineering structures
 Pattern recognition
 Scheduling, transportation, and routing
 Layout and circuit design
 Telecommunication, graph-based problems, …
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 Simulation
 Simulation is the “appearance” of reality
 It is often used to conduct what-if analysis
on the model of the actual system
 It is a popular DSS technique for
conducting experiments with a computer
on a comprehensive model of the system
to assess its dynamic behavior
 Often used when the system is too
complex for other DSS techniques
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 Application Case 10.3
Simulating Effects of Hepatitis B
Interventions

Questions for Discussion

1. Explain the advantage of operations research methods
such as simulation over clinical trial methods in
determining the best control measure for Hepatitis B.
2. In what ways do the decision and Markov models
provide cost-effective ways of combating the disease?
3. Discuss how multidisciplinary background is an asset in
finding a solution for the problem described in the case.
4. Besides healthcare, in what other domain could such a
modeling approach help reduce cost?
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 Major Characteristics of
Simulation
 Imitates reality and captures its richness
both in shape and behavior
 “Represent” versus “Imitate”
 Technique for conducting experiments
 Descriptive, not normative tool
 Often to “solve” [i.e., analyze] very
complex systems/problems
 Simulation should be used only when a
numerical optimization is not possible
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 Advantages of Simulation
 The theory is fairly straightforward
 Great deal of time compression
 Experiment with different alternatives
 The model reflects manager’s perspective
 Can handle wide variety of problem types
 Can include the real complexities of problems
 Produces important performance measures
 Often it is the only DSS modeling tool for non-
structured problems
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 Disadvantages of Simulation
 Cannot guarantee an optimal solution
 Slow and costly construction process
 Cannot transfer solutions and inferences to
solve other problems (problem specific)
 So easy to explain/sell to managers, may lead to
overlooking analytical solutions
 Software may require special skills

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 Simulation Methodology
Steps:
1. Define problem 5. Conduct experiments
2. Construct the model 6. Evaluate results
3. Test and validate model 7. Implement solution
4. Design experiments

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 Simulation Types
 Probabilistic/Stochastic vs.
Deterministic Simulation
 Uses probability distributions
 Time-dependent vs.
Time-independent Simulation
 Monte Carlo technique (X = A + B)
[A, B, and X are all distributions]
 Discrete Event vs. Continuous Simulation
 Simulation Implementation
 Visual Simulation and/or Object-Oriented Simulation
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 Visual Interactive Simulation (VIS)
 Visual interactive modeling (VIM), also
called Visual Interactive Simulation or
Visual interactive problem solving
 Uses computer graphics to present the
impact of different management decisions
 Often integrated with 3G and GIS
 Users can perform sensitivity analysis
 Static or dynamic (animation) systems
 Virtual reality, immersive, …
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 Traffic at an Intersection from
the Orca Visual Simulation

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 Application Case 10.4
Improving Job-Shop Scheduling
Decisions Through RFID: A
Simulation-Based Assessment

 Background
 Problem description
 Proposed solution
 Results
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 SIMIO Simulation Software

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 SIMIO Simulation Software

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 SIMIO Simulation Software

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 Simulation Software
 A comprehensive list can be found at
 orms-today.org/surveys/Simulation/Simulation.html
 Simio LLC, simio.com
 SAS Simulation, sas.com
 Lumina Decision Systems, lumina.com
 Oracle Crystal Ball, oracle.com
 Palisade Corp., palisade.com
 Rockwell Intl., arenasimulation.com …
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 System Dynamics Modeling
 Macro-level simulation models in which
aggregate values and trends are considered
 Objective is to study the overall behavior of a
system over time as a whole
 Evolution of the various components of the
system over time and as a result of interplay
between the components over time
 First introduced by Forrester (1958)
 A widely used technique in operations research
and management science
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 System Dynamics Modeling
medical records
- - storage
radiology -- +
+
patient
performance
- treatment time -
+ -
+

-
-
- adverse drug
event (ADE)
- staff training
-
-

E-Note +
+ E-Rx

- -
+
- + Staff time saved -
+ compliance via
+
laboratory + EHR
performance
-

+
ADE correction
cost

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 Agent-Based Modeling
 Agent - an autonomous computer program
that observes and acts on an environment
and directs its activity toward achieving
specific goals
 Relatively new technology
 Other names include
 Software agents
 Wizards
 Knowbots, Both
 Intelligent software robots (Softbots) …
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 Agent-Based Modeling
 Agent-based modeling (ABM) is a simulation
modeling technique to support complex decision
systems where a system is modeled as a set of
autonomous decision-making units called agents
 A bottom-up approach to simulation modeling
 Agent-based modeling platforms
 SWARM (www.swarms.org),
 Netlogo (http://ccl.northwestern.edu/netlogo),
 RePast/Sugarscape (www.repast.sourceforge.net),
 …

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 Application Case 10.5
Agent-Based Simulation Helps Analyze
Spread of a Pandemic Outbreak
Questions for Discussion
1. What are the characteristics of an agent-based
simulation model?
2. List the various factors that were fed into the agent-
based simulation model described in the case.
3. Elaborate on the benefits of using agent-based
simulation models.
4. Besides disease prevention, in which other situations
could agent-based simulation be employed?
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 End of the Chapter

 Questions, comments

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United States of America.

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