Preparing for Quiz 1

1
Preparing for Quiz 1

• Review notes, assignments
• Take practice quiz
• Read Tips on Taking On-line Exams
• Get a good night's rest
• Quiz 1 coverage up to and including wrap-up of
  forecasting

2
Quiz Schedule
Lab section Enter lab Quiz begins Quiz ends
8 am 755 800 840
9 am 855 900 940
11 am 1055 1100 1140
12 pm 1155 1200 1240
All lab sections treated the same
3
When you come to the lab

• Find your assigned computer
• Logon to the course web
• You may copy materials to the desktop before the
  quiz starts
• From USB key, CD, or email
• You may not use a USB key, CD, email, etc. during
  the quiz
• Listen carefully to instructions
• Have OneCard ready.

4
Reminders

• Quiz 3 is now on 30 March
• HW 3 due Wed
• Quiz Review Session, Thu 5 630 pm, BUS B-2428
• Optional
• QA session, no new material

5
MGTSC 352

• Lecture 7 Monte Carlo Simulation
• Bard Outside example

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Bard Outside

• The Bard Outside theatre group puts on plays by
  Shakespeare 20 times every summer in a 200-seat
  outdoor theatre.
• Data
• Attendance and weather (rain / no rain) for last
  five seasons (5 x 20 100 shows)
• Revenue 10 per customer
• Cost 1,600 per show
• Question how much would profit increase if the
  number of seats were increased?

7
Profit

• Profit Revenue Expenses
• Revenue
• Expenses
• What do we need to find out?
• How can we do this?

8
Data Analysis

• Whats the probability of rain?
• What is the mean and standard deviation of demand
  when it rains?
• How about when it doesnt rain?
• How can we simulate demand?
• To Excel

9
Simulating Profit per show

• Simulate weather
• Simulate demand
• Make sure 0 demand capacity
• Calculate revenue
• Subtract cost
• Replicate!
• Remember freeze tables of simulation results

10
Simulating a value from a Normal
DistributionBreaking the formula down

• ROUND(NORMINV(RAND(),mean,stdev),0)
• Step 1 generate random numberRAND()
• Step 2 convert random number to normal
  distributionNORMINV(RAND(),mean,stdev)
• Step 3 round to whole number ROUND(NORMINV(RAND(
  ),mean,stdev),0)

11
Converting random number to a normal distribution
Simulated Value 990.3
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Final results
13
Comparing Different Capacities

• Want to compare 200 seats and 210 seats
• Approach 1
• Simulate demand for 100 days
• Compute profit for each simulated day, assuming
  200 seats
• Simulate demand for another 100 days
• Compute profit for each simulated day, assuming
  210 seats
• Compare average profits

• Approach 2
• Simulate demand for 100 days
• Compute profit for each simulated day, assuming
  200 seats
• Compute profit for each simulated day, assuming
  210 seats (reuse the 100 simulated demands)
• Compare average profits
• Active learning which approach is better?
• 1 min., in pairs
• List as many pros and cons as you can

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Pros and Cons

• Approach 1(simulate 2 ? 100)

• Approach 2(simulate 1 ? 100)

15
Bard Outside Example A Newsvendor Problem

• Bard Outside
• Decision of seats
• Uncertain future demand
• Demand gt of seats ? lost revenue
• Demand lt of seats ? empty seats

• A newsvendor
• Decision of newspapers to get
• Uncertain future demand
• Demand gt of papers ? lost revenue
• Demand lt of papers ? disposal costs

16
Active Learning

• In pairs, 1 min.
• Think of three other examples of newsvendor
  problems
• Examples

17
Bard Outside Revisited

• We estimated the average profit per show with 200
  seats to be about 11 per night
• Bard Outsides accountant says theyve been
  earning an average of 100 per night
• Whats wrong?

18
Another look at the No Rain Attendance
Distribution
Attendance (up to 199)
200 or more 51 of the time
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What we did Fit a Normal Distribution with Mean
176, Stdev 39
Attendance of 200 or more 51 Demand of 200 or
more 27
Demand
Attendance
Can we do better?
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How about this Normal Distribution with Mean
200, Stdev 50
Attendance of 200 or more 51 Demand of 200 or
more 50
Demand
Attendance
The attendance distribution is a censored
version of the demand distribution. We need to
uncensor it before using it to simulate.
21
How Much Difference Does this Make?
Avg. profit (/show) 200 seats 210 seats 220 seats Extra profit per seat
Take 1 11 24 33 1.10
Take 2 113 146 173 3.00