Why Simulation is Important in a Tough Economy

Everyone wants to cut costs. No one wants to spend unnecessarily. When budgets are tight, software and software projects are an easy place to cut. Staff positions like Industrial Engineers are sometimes easier to cut or redeploy than production jobs. I suggest that following this reasoning to eliminate simulation projects is often short-sighted and may end up costing much more than it saves. Here are a few reasons why it may make sense to increase your simulation work now.

1) Minimize your spending. Cash is tight. You cannot afford to waste a single dollar. But how do you really know what is a good investment? Simulate to ensure that you really need what you are purchasing. A frequent result of simulations intended to justify purchases is to find that the purchases are NOT justified and in fact the objectives can be met using existing equipment better. A simulation may save hundreds of times its cost with immediate payback.

2) Optimize use of what you have. Could you use a reduction in cost? Would it be useful to improve customer satisfaction? I assume that your answer would always be yes, but even more so in difficult times. But how can you get better, particularly with minimal investment? Simulation is a proven way to find bottlenecks and identify often low-cost opportunities to improve your operation.

3) Control change. In a down economy you are often using your facilities in new and creative ways – perhaps running lean or producing products in new ways or in new places. But how do you know these new and creative endeavors will actually work? How do you know they will not cost you even more than you save? Simulation helps you discover hidden interactions that can cause big problems. Different is not always better. Simulate first to avoid costly mistakes.

4) Retain/improve your talent pool. Some people who might otherwise be laid off may have the skills to be part of a simulation SWAT team. By letting them participate in simulation projects, they will likely achieve enough cost reduction and productivity improvements that they more than pay for themselves. As an added bonus, the team will learn much about your systems, the people, and communication – knowledge which will improve their value and contributions long after the project is complete.

5) Reduce risk. You are often forced to make changes. How do you know they are the right changes? Will a little more, a little less, or a different approach yield better results? How do you measure? A strength of simulation is its ability to objectively assess various approaches and configurations. Substitute objective criteria for a “best guess”, and, in turn, reduce the risk associated with those changes. In a down economy it is more important than ever that you don’t make mistakes.

In summary, rather than thinking of the cost of simulation, you should think of what the investment in simulation today will save you today, tomorrow and every day following. Simulation is not a cost, it is an investment that may return one of the best ROIs available in a tough economy.

Dave Sturrock
VP Products – Simio LLC

Simulation and Strategic Management

Guest article from Marco Ribeiro

Corporations everywhere today face the huge challenge of surviving and growing in an extremely competitive environment. Markets are shaped and reshaped due to constant innovation, customer demands and fierce competition. All these forces demand that corporations continuously reinvent themselves trying to maintain competitive advantages that differentiate them from the competition.

Strategic planning in such an environment is a difficult challenge that corporations must overcome successfully. Corporate strategic planning deals with such complex issues as:

    * Understanding the market and its future trends – understand suppliers, competition, their competitive advantages and market positioning. Know the future trends that will shape the market.
    * Future resource allocation – how the corporation’s resources should be organized in order to maintain an efficient operation.
    * Scope of operations -in which businesses should the corporation operate, which ones should be dropped out
    * Diversification of the corporation’s business – should the corporation focus its operations in a small and related set of businesses or should it look to diversify to heterogeneous businesses
    * Future structure of the company – draw the boundaries of the corporation and determine how these boundaries will affect relationships with suppliers and customers

The strategy defined will address all these issues in detail and determine the future direction of the corporation.

Can we use simulation to support the strategic planning process?
Yes, we can. As Thomas Davenport and Jeanne Harris describe in their book: Competing on Analytics: The new Science of Winning, we will see an increasing demand and use of analytical technologies supporting corporation’s decision-making processes.

Simulation can play an important role by helping managers create models of their markets and processes and “toy” with them in order to get a deeper understanding. We can also use simulation to support such efforts as portfolio analysis and management, helping managers determine how to most effectively manage and configure their product life cycle. We can build models of processes and determine the most efficient configuration. Simulation is a valuable tool to test scenarios and make better business decisions.

Marco Ribeiro
LinkedIn Profile

Missing the Date – Arriving Late to the Party

How many times have you shown up late to an event? Perhaps something came up at the last minute. Perhaps you encountered road construction. Or maybe you just failed to think ahead. Sometimes it all works out. But sometimes you miss something important – like your sister’s wedding vows or your child’s big performance.

In an earlier article, we talked about the importance of project planning and management. Although there are many aspects to success, let’s concentrate on the completion date for the next few minutes. A project that produces results after the decision is made has little value. And a project running over budget due to lateness may be cancelled before completion. Success requires appropriate attention to completion dates.

Late projects are a chronic problem in all types of software development. Let’s start by exploring some of the causes of lateness.

Expectations – Planning the Journey

In software development the constraints of Date, Resources, Features, and Quality are well known. You can specify or mandate any one, two, or possibly even three of those factors, but if you try to mandate all four, you will almost certainly fail. For example, I can say I want all features completed with high quality, in 90 days, but then I have to be prepared to allocate resources as necessary. Or if I want it done with a maximum of 3 people, then I must be prepared to slide the date or other constraints. These same aspects apply to most simulation projects – perhaps substituting the word Comprehensiveness for Features and the phrase Validation/ Verification for Quality.

Since many projects start off in an urgent, budget-constrained status, management often tries to mandate all four constraints. But can I really specify all four constraints (e.g. all features completed with high quality, in 90 days, with a maximum of 3 people)? NO – not unless I have started with a very loose schedule (unlikely with an urgent project). I have generally found that attempting to do so will just mean that I will have no idea, until near the end, by how much each of the constraints will be missed. Note I said “by how much”, not “if”. As the anticipation of missing the date approaches, the pressure will increase at all levels to “cut corners”. Then, to save the viability of the project there is often a last-minute attempt to add resources to “save the date”, but that attempt is usually too late to have much impact.

Road Construction Next Million Miles

Assuming that we have reasonable expectations up front, what are some of the other problems that can hijack the schedule?

Objectives – Poor project objectives, as we discussed last week, is a huge potential problem. If you start with a missing or inadequate functional specification and a poor understanding of project, it is unlikely that you can develop a realistic project plan.

Optimism – I like to be guided by Murphy’s adage “Anything that can go wrong, will.” Many people think that it is safe to base their project estimates on “reasonable” effort estimates. But “reasonable” often becomes highly optimistic when adjusted by real world situations.

Stakeholder Involvement – First of all, you need to know who your “customers” are. If you are working for a large organization it might be difficult to determine who all the people are who have a stake in your project. If you are a consultant, this may be a bit easier. But after you identify them, the stakeholders must be involved. If they are not involved then you may be missing the important resources and information, and your project priority may suffer.

Skills – We are all smart, resourceful people. We all like to believe that we know, or can quickly learn, whatever we need to know to complete the project. But quite often there are many things we don’t know. And even more dangerous, there are things that we don’t even know that we don’t know.

Of course there are many other areas where you could go wrong – I’ll talk about them in future blogs. For now, maybe give some thought to these concepts and in a future blog we will talk about dealing with this first set of pitfalls.

Happy modeling!

Dave Sturrock
VP Products – Simio LLC