What we have learned about Simulation

Our group has finished our Wiki subject perfectly. Here is our group work about Simulation, if you are interest in studying simulation, you may get some help from our works.

1. WHAT IS SIMULATION?

A simulation is basically the imitation of a real life event, process or circumstance. Simulations are used because they are usually an economically feasible way of experimenting what if scenarios of real events that couldn’t be done otherwise. The uses of simulations are very varied, from educational purposes like flight simulators to train pilots to weather predicting simulators which seek to forecast changes in the world’s climate by altering diverse parameters.

Models can be designed to explain simple situations like calculating sales commissions in a business, this type of models are called deterministic because they will always produce the same results when re-calculated. However, there are several instances where imitating real life events are considerably more complex due to uncertainty in the various parameters that influence the event.

2. MONTE CARLO SIMULATION

The technological advances undertaken over the years have greatly increased our ability to elaborate more powerful simulation models. The data processing power of computers makes complex simulations possible. One application of computers to simulation is the Monte Carlo simulation method which basically generates numerous random values for the parameters in a model to be evaluated, hence, turning the deterministic model into a stochastic model.

Moreover, this method is used for analyzing uncertainty propagation or how random variation affects the sensitivity of the model being evaluated. To effectively use this simulation method, a probability distribution that appropriately describes the data at hand must be selected. From this distribution, a computer draws random values which essentially is a sample from the distribution, thus this method is considered a sampling method.

Monte Carlo simulation can be easily implemented for models to determine demand forecasts, price variations, inflation effects on profits among other situations, using the following five steps:

1. Create a function that describes Y in terms of the variables identified as relevant.
2. Generate a sample of random values to use as inputs.
3. Evaluate the values generated in the model.
4. Repeat steps 2 and 3 as many times as desired.
5. Analyze the results using the appropriate tools like histograms for example. ( By Gerardo)

3. WHEN DO WE USE MONTE CARLO SILMULATION?

Whenever we need to make an estimate, forecast or decision where significant uncertainty exists, the Monte Carlo simulation could be the best choice for us. Otherwise, our estimates or forecasts could be deviation, as a result, the consequences would be inaccurate and the wrong consequence may adverse for our decisions. In the actual business environment, most business activities, plans and processes are too complex for an analytical solution. However, we can build a spreadsheet model that can give us numerical support to evaluate the plan. Therefore, if there are some changes in the parameters, we can get our results by changing numbers or by asking 'what if analysis.' This is straightforward if we have just one or two parameters to explore. Some business situations, however, involve uncertainty in many dimensions. For example, we are facing a variable market demand and we do not know about the competitors' plans, uncertainty in costs etc. If the situation sounds like this, we may find that the Monte Carlo method is surprisingly effective for us as well.（By Caesar)

4. OTHER USES OF SIMULATION IN BUSINESS DECISION MAKING

As stated above, simulation has been a very powerful tool to help managers make decisions in a business world of uncertainty and complexity. Another example of the use of simulation is in supply chain management (Kumar & Singla). The Distribution Network Simulator is a scenario-based decision making tool to help analyze the operational behavior of an existing or planned supply chain or distribution channel. The model uses entities such as nodes (factories, hubs, and other facilities), routes between the nodes, processes and policies, products and their demands, transportation modes (trucks, ships, and airplanes), shipments sizes, and service levels to build simple and complex model of supply chains and distribution networks. For example, it integrates the uncertainty in demand and transportation and uses a range of stocking and ordering policies to determine the fill rates. The Distribution Network Simulator is powerful in many aspects. For example, it helps to evaluate the effect of changes of costs in the supply chain, analyze the effectiveness of resource utilization or damages of bottleneck within the network, or the impacts of reduction in inventory or transportation costs.

Works Cited:

Baker, S. G. & Powell, K. R. (2009). Management Science: The art of modeling with spreadsheets. Hoboken, NJ: Wiley.

Kumar, R. & Singla, J. Simulation modeling in retail logistics and supply chain.

5. Simulation vs. Spreadsheet Analysis

Because I am the last contributor to the simulation wiki, I want to address a question that has not been covered: why use simulation over a spreadsheet analysis?

It is fairly simple to develop a spreadsheet analysis. However, as the analysis becomes more complex, there is a need for more complex computer based programs. Spreadsheets can perform advanced calculations to arrive at an answer, but it uses averages to get there. Because it uses averages, spreadsheets cannot accurately display the randomness and interdependence of the situation. However, simulation is able to anticipate the randomness and interdependence of the situation. Therefore, simulation is more applicable to the real world than spreadsheets. For instance, the time needed for assembling a widget may take an average of 10 minutes. However, a special order widget may take 45 minutes to complete. If you use a spreadsheet, you will have to use the average time, thus your analysis will not be able to accurately capture the variability that exists. Another difference between the two is that spreadsheets are static. This means that spreadsheets can only estimate a quantitative result for a single moment of time. Stimulation, on the other hand, is dynamic and can replicate your business reality. (By Kody)

Works Cited

"Justifying Simulation." Justifying Simulation: Why Use Simulation. ProModel, n.d. Web. 7 Nov 2010. .

Japan’s economy showes strong growth

TOKYO – Japan’s economy gained momentum in the third quarter, growing at an annualized pace of 3.9 percent, as the final stretch in government stimulus gave private consumption a last-minute lift. Still, economists warned of an imminent slowdown as a strong yen, faltering exports and the end of generous government incentives on fuel-efficient cars pinch company earnings. Deflation or the debilitating and widespread decline in prices, has also weighed on Japan’s recovery from its worst recession since World War II.The new figures showed that gross domestic product expanded 0.9 percent in the three months to September from the previous quarter -- Japan’s fourth consecutive quarter of growth -- accelerating from a 0.4 percent gain in the second quarter and beating a median forecast for a 0.6 percent rise.The expansion translated to an annualized gain of 3.9 percent, topping the annualized expansion of 2 percent in the United States in the same quarter. Private consumption, which accounts for about 60 percent of the economy, increased 1.1 percent, helped by government incentives on the purchase of fuel efficient cars and energy-saving appliances. Those incentives ended in September. But in a sign of slowing demand overseas, net exports made no contribution to growth in the July-September quarter. More recent economic data, including sluggish capital expenditure numbers, have pointed to a slowdown in Japan’s economy, the world’s third largest, after those of the United States and China. The yen’s surge this year to 15-year highs, and an economic slowdown in China, Japan’s largest trading partner, also poses risks to Japan’s economic outlook, economists say. Recovery in Japan’s labor market has been lackluster, with the unemployment rate at 5 percent. Though low by international standards, the unemployment rate masks the rise of temporary and low-paying jobs, especially among women. Last month, Japan’s central bank last month eased its already-loose monetary policy in a bid to shore up the country’s faltering recovery, lowering its benchmark interest rate to a range of 0 percent to 0.1 percent and setting up a fund of 5 trillion to buy Japanese government bonds, commercial paper and other securities. Meanwhile, Japanese Prime Minister Naoto Kan has pledged to bolster economic growth by opening up Japan’s markets, saying Tokyo should join a United States-backed free trade initiative that spans the Pacific Rim. But Mr. Kan’s plan faces staunch opposition from Japan’s farmers, who fear losing the protection of the country’s high tariffs against agricultural imports. On Sunday, Japan joined other leaders at the Asia-Pacific Economic Cooperation summit in committing to take steps to form a region-wide free trade zone.

Jet Engine Failure Causes Worry on Manufacturer

The blowout of an engine on Qantas Flight 32 on Thursday was the latest in a series of problems involving Rolls-Royce engines and analysts said it raised serious questions about the company’s ability to develop the engines for the newest generation of commercial and military airplanes. Because of the engines probles, Rolls-Royce is facing a large margin profit loss. The world’s largest passenger plane and a flagship program for airbus-- Quantas may stop the contract with Rolls-Royce engines manufacturing then start to sign a longer contract with Rolls-Royce competitor-- General Electric. I think it's not only an affair which happens on a big manufacturing company. It's also a economic issue that would influence a city, a nation, even the world. For example, we can propose that after Rolls-Royce engines' breaking. thousands of employees who are working for Rolls-Royce will lose their jobs. By the way, the local government should give more compainsation to those people who lose their jobs. Moreover, if this company is a very important revenue maker for the country. Lose it must be a big issue for this country.

Retailers Tally a Mixed October as Sales Rose 1.6%

Recently, many retailers are greeting an increase on sales. At the 28 stores tracked by a data collector Thomsan Reuters. An index that excludes the nation’s largest retailer--Wal Mart. There was a 1.6 percent increase in sales at stores open at least a year. This seems to be a good news for American retailers who have been suffering a severe influence by financial crisis since last year. But, the problem is that this increase can't be considered as a indicator of the economic regeneration because the increase rate is the lowest since April. In my opinion, the concerned about the economy and the macro issues is the main point that drives their purchasing behavior. People in American still worry about the economic depression and have no confidence about a better economic rebound is coming soon. So they prefer save their money for the later time than cost a lot to enjoy today. I think the government should do something to stimulate consumers such as: reduce the lam sum tax during this period, some big city can reward the retailer to let them make a discount on productions etc. This would either let consumers feel more satisfied or could incourage them to buy more stuffs. So why doesn't the government do something to get this Win-Win goal.

U.S keep pressure on Beijing to appreciate its currency

There was an article on NYtimes recently, the title is " Exports of Chinese goods continued to surge in September." The author gave us a series of numbers to indicate that if Chinese foreign exchange reserves keep soaring, as well, the government control the currency not appreciating, China would suffer a terrible inflation in later years. For instance, the author cited a batch of data which from Beijing( I don't know where it's exactly from, street bar? farm? or government, but anyway~~)showed that: Chinese monthly trade surplus reached $16.9 billion in September, with exports up 25 percent and imports climbing 24 percent. And also, Chinese exchange reserves soared $194 billion in September to a record $2.65 trillion becomes the world's largest currency reserve holdings. At first, I thought the following parts of the article would be find how these money come from and tell us weather these money is good for Chinese or even globel eco. But at last, i figure out that the purpose of this article can be considered as a pressure on Beijing to appreciate its currency, which from the most popular American broadcasting department-- NY times. So i really find out the Chinese currency right now is a really serious problem not only for China itself, but all around the world.

China’s Ban on Selling Rare Earth Minerals to Japan Continues

Chinese customs officials continued to prohibit all exports of rare earth minerals to Japan over the weekend. The reporter claims that it must be some correlation between the prohibition and the recent dispute of the two with a fishing boat captain whose vessel collided with two Japanese patrol boats on one night near islands Japan controls but China claims.
Personally, I'm quite agree with the authors' opinion. I can assume that each important economical decision must be related to a big political affair what has just happened at this era.

Managerial accountants----Watch out!

All the things what i'm going to talk about are totally personal opinion, and the inspiration is from a case study of Managerial accounting.
Yesterday, I read a case about MA, it was said about a company which suffered net profit deduction in early 1970's. However, the company was also urgent need some loan from the bank to increase its volume of production. The income statement represented the bad achievement of the company at that time, so the manager decided to do some revise on that which could make the income statement looks better. But, he had no idea what should he do, so the question is about how we can help him to revise the income statement, and make the net profit looks more. After reading, I was shocked by the case and realized that a good accountant must be smart enough. Why? because he should know how to use his skill to change not only a income statement, but also " the achievement of the company". Also, I connect this case study to our real life at the present. Assume the case is true and that company finally get the loan from the bank, don't you think it's a kind of cheat? If there is a company which has a terrible net profit, and also wants to get the money from bank, wether the account from the company rivise the income statement and get the money? Don't you think most of the commercial defrauds are act like the same as this case study? For me, I don't know exactlly if we can call this a cheat, but I think there is a boundary of revise equitable. if we across the boundary, that means the criminal is happening. So managerial accountants you'd better watch out!