Written by on Wednesday February 23rd 2011 in What We're Thinking

What’s wrong with average?

Don't use averages, use simulation!

On one of my many internet wanderings I came across a blog post on what’s wrong with averages which I really liked so I thought I’d share. It’s a detailed explanation of why spreadsheet simulations get it wrong and why you need a simulation tool like SIMUL8 to really make decisions about your process.

Spreadsheets are great for static analysis but in many cases they underestimate the resources required. Spreadsheets force you to describe a situation as an approximation, e.g. it takes and average of 5 minutes to serve each customer. In real life this isn’t the case. It takes 3 minutes to serve the customer if they have 4 items, it takes 7 minutes if they have 20 items. Approximating means results such as resource utilization time and customer waiting time are all inaccurate. Only simulation gives you the flexibility to describe events and timings as they actually are in real life.

Spreadsheets also only let you model a steady state scenario but simulation lets you build in random occurrences like a machine breaking down and see the effects of this further down the line. Simulation also lets you add business rules. So what happens if you only need your fabric-folding machine for 10% of the work you do, but your 2 workers tend to need the folding machine at the same time each week?  One of your people wastes time waiting – this interaction is missed by a spreadsheet – but is automatically handled by simulation. So spreadsheets underestimate the resources you need.

The more complex the scenario is the more spreadsheets fall down and simulation software is the only answer.

John Poppelarr’s blog – What’s wrong with averages