simulation-model-design

Design, run and read a Monte Carlo simulation when a plan depends on several uncertain inputs. Use whenever someone asks for a risk or what-if model with uncertain demand, cost, price, duration or returns; the chance a project, budget or forecast misses its target; a range instead of a single estimate; which distribution to use for an input; how many simulation runs are enough; how much to order or stock for one selling season when demand is uncertain, including the newsvendor critical ratio from overage and underage costs, and the service level or fill rate it implies; the probability a project finishes by a date or which tasks drive schedule risk; or why a plan built on average inputs is too optimistic. Not for choosing between a few options with known probabilities in a decision tree, not for deterministic optimisation of a production or allocation plan, and not for forecasting a time series.