Business Process Modelling – Term 4: PGDM 2017-19

Assignment

On

SIMULATION MODEL- DEVELOPMENT AND ANALYSIS

Submitted by:

Girish N Totiger
PGDM No. 17011

Submitted to:

Dr. R. Jagadeesh
SDMIMD, Mysuru

Submitted on: 10th Ausust, 2018

SDM Institute for Management Development

Mysuru, Karnataka, India
Simulation Model: simulation model for a new business in the market

Case:

A new saloon needs to introduce in the market to compete with the regional market leaders i.e.
Green trends, Lakme salon, Naturals, are the 3 saloons beside each other and have sampled several
hundred of their customers and asked them to rate their experience from 1 to 5 (in which 1 is
excellent and 5 is poor) according to professionality, Hygienic environment, and past experience.
Following are the resulting probability distributions for these three traits.

Design a simulation model for the customers select among three saloons:

(Assuming the survey purely done after the customer is cross checked with the past experience he
has among 3 saloons)

Professionality 1 2 3 4 5
Probability 0.27 0.35 0.14 0.9 0.15

Hygienic
environment 1 2 3 4 5
Probability 0.1 0.16 0.45 0.17 0.12

Past experience 1 2 3 4 5
Probability 0.15 0.3 0.33 0.07 0.15

1. Introduction:

Three saloons are having huge competition in the R.k. beach road in vizag where these 3 saloons
are beside each other in a shopping complex and one more observation is foot fall of the no of
customers are more or less equal. They wanted to see whether what will be the more important
constraint that the customer sees before having a service from the particular saloon.

Simulation
Step 1: Develop Random Number Ranges for the Probability Distributions
 Cumulative
Professionality Probability Probability lower limit
1 0.27 0.27 0
2 0.35 0.62 0.27
3 0.14 0.76 0.62
4 0.9 1.66 0.76
5 0.15 1.81 1.66

Hygienic Cumulative lower

environment Probability Probability limit
1 0.1 0.1 0
2 0.16 0.26 0.1
3 0.45 0.71 0.26
4 0.17 0.88 0.71
5 0.12 1 0.88

past Cumulative lower

experience Probability Probability limit
1 0.15 0.15 0
2 0.3 0.45 0.15
3 0.33 0.78 0.45
4 0.07 0.85 0.78
5 0.15 1 0.85

Step 2: Set Up a Tabular Simulation

Simulation for first fifty periods

Hygienic past
Date Professionality environment experience overall
1 2 3 3 8
2 1 3 5 9
3 2 3 3 8
4 3 2 3 8
5 4 2 4 10
6 3 3 4 10
7 2 1 5 8
8 1 3 3 7
9 2 3 3 8
10 4 1 3 8
11 1 3 2 6
 12 4 4 2 10
13 4 1 2 7
14 4 3 5 12
15 1 3 4 8
16 4 2 2 8
17 2 3 5 10
18 4 3 2 9
19 2 4 3 9
20 4 4 4 12
21 2 3 3 8
22 4 1 3 8
23 3 5 5 13
24 4 4 3 11
25 2 3 2 7
26 1 4 2 7
27 4 2 1 7
28 2 3 1 6
29 4 2 2 8
30 1 4 3 8
31 2 4 5 11
32 1 5 3 9
33 2 2 3 7
34 4 2 2 8
35 3 2 3 8
36 4 2 3 9
37 4 5 1 10
38 2 3 2 7
39 4 2 3 9
40 3 3 3 9
41 1 2 3 6
42 2 4 3 9
43 1 2 4 7
44 2 1 1 4
45 4 2 3 9
46 2 5 4 11
47 2 2 3 7
48 2 1 2 5
49 3 4 4 11
50 3 1 3 7
Avg 2.64 2.78 3 8.42

For the above fifty period of simulation the average personality 2.64 , average hygienic is 2.78,
average past experience is 3 and overall average for 3 is 8.42.
For next twenty trails, each of 50 periods

Hygienic past
Trail Professionality environment experience overall
1 2.64 2.78 3 8.42
2 2.3 3.16 2.52 7.98
3 2.28 3.1 2.88 8.26
4 1.92 3 3.08 8
5 2.58 3 2.9 8.48
6 2.66 3.1 3.26 9.02
7 2.42 3.14 2.72 8.28
8 2.3 3 2.36 7.66
9 2.42 2.76 2.58 7.76
10 2.32 2.9 2.42 7.64
11 2.44 3.08 2.5 8.02
12 2.26 3.08 2.54 7.88
13 2.22 2.84 2.64 7.7
14 2.3 3.12 2.72 8.14
15 2.48 3.04 2.72 8.24
16 2.12 3 2.76 7.88
17 2.44 3.06 2.78 8.28
18 2.22 3.18 2.6 8
19 2.3 3.08 3.08 8.46
20 2.1 3 2.68 7.78
avg 2.336 3.021 2.737 8.094
std 0.182104655 0.1190268 0.23720078 0.344466
expected 2.64 2.78 3 8.42

From above table all the values of variable of average value are nearer to the expected
value, the simulated model is close to the expected model, but it will not exactly match.
2. Explain the strategic importance of the model under development, that is, how
the proposed model is helpful in a decision-making environment.

The importance of this model, using this model we can find out the probability occurrence of the
customers choices and based on this the new company may come up with the unique
techniques that will attract the customers more than the 3 saloons.

3) Identify the variables and illustrate how the probability distributions are selected.

The model consists of three independent variables professionality, Hygienic environment, and past
experience. The overall column indicates the combinedly the estimation of the peoples thinking
towards the selection of the saloon.

The three variables are

professionality, Hygienic environment, and past experience.

Professionality, Hygienic environment, and past experience: The Probability distribution seems like a
normal distribution curve and the data are obtained from the survey.

4). Describe what type of scenarios are possible and what would be the consequence of
such scenarios.

In the 50 period of the simulation we can see that there most of the people are choosing the saloon
based on the past experience. So, brand building is the major place where the company need to take
care. Beyond that providing the hygienic environment will be the main for the companies like
saloons.

5). What limitations exist for your model?

 The simulation for the number of weeks considered i.e. 50 seems low as larger the
simulation number, more accurately shall the model conform to the ideal value.
 The distribution used to generate the random numbers to simulate was random
distribution. Instead in real life, there are chances that it may follow normal distribution
too. Or the random number generated may not show randomness in its nature too.

6). What additional variables are likely to be present and how they can be introduced
into the simulation model?

As this is a saloon companies the addition variables are like location of saloon , varieties of
treatments they offer , Updated equipment’s etc. It can be introduced as an independent
random variable in determining the choice of the customer.
The probability of the variables can be changed into different distributions.

7). If there is a possibility of error coming into the model, how do you verify and validate
your model? What precautions might be necessary?

There may be a possibility of error due to the input error made by the simulator. To verify the
model should matches specifications and assumptions with respect to the model concept and
to validate the model should satisfactory range of accuracy consistent with the intended
application of the model. To verify and validate the model’s average value must be nearer to
expected value. Before building the model one must take precaution that the input given are
correct and the validated.
 8). Overall conclusion.

From the above simulation we got to know most of the customers are choosing the saloon
because of their past experience and also the next constraint comes is the hygienic factor that
makes a huge difference to choose the saloon. The model created is just a close match to imitate
the variabilities changes randomly with customer to customer. The numbers of runs conducted
may not be enough to obtain the exact imitation of required model. More number of runs must
be conducted to get the average of simulated value equal to expected value. The rage of the
variables must be reduced to control the volatility of the random numbers generated. The
current model’s variables are only three but there are a greater number of variables in real
situation. Hence all the variables must be taken into consideration and more number of runs
should be performed to get exact simulation model which is the imitation of real situation. So
that of new launch of company will be more appropriate and will be more effective.