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Simulation: Monte Carlo Model

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1) Design a simulation of a business situation by preparing a table based on the Monte Carlo model for machine breakdown repair.
2) How does the simulation work and how was the data for the probabilty distribution obtained?

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The response addresses the queries posted in 1163 words with references.

//Before, discussing about the Monte Carlo Model, we have to first of all understand the meaning of Simulation and in which areas simulation works. This knowledge helps you to make clear that with the help of the simulation model, one can easily render an insight into certain management problems.//

Simulation refers to an analytical method which imitates a "real life situation" and is widely used to solve the business problems. It is extremely useful when the other methods are too complex or too mathematical to use. Simulation is an appropriate substitute for mathematical evaluation of a model. It enables us to provide an insight into certain management problems where mathematical evaluation is not possible.

Simulation works in many areas like:

1. Marketing: It has made great gains in this area. Many companies are now developing total marketing decision models rather than separate ones for each area. These are known as market simulator.

2. Inventory: Monte Carlo has been applied to inventory systems under certainty for many years. Simulation can not only be applied to certain phases of inventory, such as setting reorder points and determining usage during the reorder point, but also can be applied to integrating production scheduling models and inventory control models for a combined production inventory system.

3. Manufacturing: Many companies are using it to test new ideas in production scheduling. A subset of scheduling problems known as the job shop problem has been the subject of simulation studies. It can be applied to simulation of a production line and determination of size of maintenance force (both of them are areas of manufacturing).

4. Finance & Accounting: The risk related to an investment can be minimized if more is learned about the effects of the many factors by evaluating alternative ...

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