Question

As a consultant for as service company (such as a hospital, airport, restaurant etc.) you can analyze their service operations in multiple ways. Three of them are: 1) application of waiting line theory, 2) application of a manual Monte Carlo Simulation and 3) Application of a simulation software such as Simquest. For each of these three, describe a business situation where you would apply this methodology, and why this approach would be superior to the other two.

Answer 1

ANS 1. APPLICATION OF WAITING LINE THEORY IN BUSINESS : WHEN THE PACKAGES ARE WAITING IN THE WAREHOUSE TO BE SHIPPED, WE CAN APPLY WAITING LINE THEORY. THIS IS A BETTER METHOD THAN MONTE CARLO SIMULATION BECAUSE MONTE CARLO METHOD IS USED TO ANALYSE THE RISK FACTORS AND THEN TAKE DECISIONS TAKING INTO ACCOUNT THE RISK VARIABLES BUT IN THE ABOVE SITUATION NO RISK FACTOR IS THERE OR NEED NOT BE DETERMINED. SIMULATION SOFTWARE NEED NOT APPLY HERE BECAUSE THEY ARE APPLIED TO ANALYSE AND SOLVE COMPLEX ISSUES RELATED TO COST AND REVENUE.

ANS 2. APPLICATION OF MANUAL MONTE CARLO SIMULATION: WHEN A FIRM IS INTRODUCING A NEW PRODUCT IN THE MARKET, THEY HAVE TO ANALYSE THE RISK FACTORS AND UNCERTAINTIES THEN THIS METHOD IS USED. THIS IS BETTER THAN WAITING LINE BECAUSE IT IS WIDER IN SCOPE AND TAKES MORE VARIABLES WHICH CAUSES MORE RISK INTO CONSIDERATION. ON THE OTHER HAND SIMULATION SOFTWARE ARE MOSTLY APPLIED TO A COMPLEX PROBLEM.

ANS 3. APPLICATION OF SIMULATION SOFTWARE: SIMULATION MODELS CAN BE USED IN THE SITUATION WHEREIN COMPANIES SEEK TO LOWER THE COST OF RESOURCES THAT ARE UNDERUTILIZED OR OF TECHNICAL EXPERTS OR EQUIPMENTS. MONTE CARLO METHOD WILL ONLY TELL ABOUT THE RISK FACTORS AND NOT THE SUGGESTIONS TO REDUCE COST. MOREOVER IT IS A MANUAL METHOD SO IT CAN HAVE A DEGREE OF ERROR IN IT. WAITING LINE METHODS ARE USED TO REDUCE TIME IN THE SCM WHICH WILL SOMEHOW REDUCE COST BUT NOT OVERALL COSTS.