Part 8: Input Modeling

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Agenda
1. Purpose & Overview
2. Data Collection
3. Identifying Distribution
4. Parameter Estimation
5. Goodness-of-Fit Tests
6. Multivariate and Time-Series Input Models

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1. Purpose & Overview
Input models provide the driving force for a simulation model.
We will discuss the 4 steps of input model development:
• Collect data from the real system
• Identify a probability distribution to represent the input
process
• Choose parameters for the distribution
• Evaluate the chosen distribution and parameters for
goodness of fit.

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2. Data Collection
One of the biggest tasks in solving a real problem. GIGO – garbage-in-
garbage-out
Suggestions that may enhance and facilitate data collection:
• Plan ahead: begin by a practice or pre-observing session, watch for
unusual circumstances
• Analyze the data as it is being collected: check adequacy
• Combine homogeneous data sets, e.g. successive time periods, during
the same time period on successive days
• Be aware of data censoring: the quantity is not observed in its entirety,
danger of leaving out long process times
• Check for relationship between variables, e.g. build scatter diagram
• Check for autocorrelation
• Collect input data, not performance data

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3. Identifying the Distribution (1): Histograms
(1)
A frequency distribution or histogram is useful in determining the
shape of a distribution
The number of class intervals depends on:
• The number of observations
• The dispersion of the data
• Suggested: the number intervals  the square root of the sample size
works well in practice
If the interval is too wide, the histogram will be coarse or blocky and it’s
shape and other details will not show well
If the intervals are too narrow, the histograms will be ragged and will not
smooth the data

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3. Identifying the Distribution (1): Histograms
(2)
For continuous data:
• Corresponds to the probability density
function of a theoretical distribution
• A line drawn through the center of each class
interval frequency should results in a shape
like that of pdf

For discrete data:

• Corresponds to the probability mass function
If few data points are available: combine adjacent
cells to eliminate the ragged appearance of the
histogram

Same data with

different interval
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 3. Identifying the Distribution (1): Histograms
(3)
Vehicle Arrival Example: # of vehicles arriving at an intersection between 7 am and 7:05
am was monitored for 100 random workdays.
Arrivals per
Period Frequency
0 12
1 10
2 19
3 17
4 10
5 8
6 7
7 5
8 5
9 3
10 3
11 1
There are ample data, so the histogram may have a cell for each possible value in the data
range

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3. Identifying the Distribution (2): Selecting the
Family of Distributions (1)
A family of distributions is selected based on:
• The context of the input variable
• Shape of the histogram
– The purpose of preparing a histogram is to infer a known pdf or pmf
Frequently encountered distributions:
• Easier to analyze: exponential, normal and Poisson
• Harder to analyze: beta, gamma and Weibull

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3. Identifying the Distribution (2): Selecting the
Family of Distributions (2)
Use the physical basis of the distribution as a guide, for example:
• Binomial: # of successes in n trials
• Poisson: # of independent events that occur in a fixed amount of time
or space
• Normal: dist’n of a process that is the sum of a number of component
processes
• Exponential: time between independent events, or a process time that is
memoryless
• Weibull: time to failure for components
• Discrete or continuous uniform: models complete uncertainty. All
outcomes are equally likely.
• Triangular: a process for which only the minimum, most likely, and
maximum values are known. Improvement over uniform.
• Empirical: resamples from the actual data collected

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3. Identifying the Distribution (2): Selecting the
Family of Distributions (3)
Do not ignore the physical characteristics of the process
• Is the process naturally discrete or continuous valued?
• Is it bounded or is there no natural bound?
No “true” distribution for any stochastic input process
Goal: obtain a good approximation that yields useful results from the
simulation experiment.

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3. Identifying the Distribution (3): Quantile-
Quantile Plots (1)
Q-Q plot is a useful tool for evaluating distribution fit
If X is a random variable with cdf F, then the q-quantile of X is the  such that

F     P X     q for 0  q  1 By a quantile, we mean the

• When F has an inverse,  = F-1(q) fraction (or percent) of points
below the given value

Let {xi, i = 1,2, …., n} be a sample of data from X and {yj, j = 1,2, …, n} be the
observations in ascending order. The Q-Q plot is based on the fact that yj is an
estimate of the (j-0.5)/n quantile of X.

percentile: 100-quantiles
 j - 0.5 
y j is approximately F -1   deciles: 10-quantiles
 n  quintiles: 5-quantiles
where j is the ranking or order number quartiles: 4-quantiles

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3. Identifying the Distribution (3): Quantile-
Quantile Plots (2)
The plot of yj versus F-1( (j-0.5)/n) is
• Approximately a straight line if F is a member of an appropriate family of
distributions
• The line has slope 1 if F is a member of an appropriate family of
distributions with appropriate parameter values
• If the assumed distribution is inappropriate, the points will deviate from a
straight line
• The decision about whether to reject some hypothesized model is
subjective!!

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3. Identifying the Distribution (3): Quantile-
Quantile Plots (3)
Example: Check whether the door installation times given below follows a
normal distribution.
• The observations are now ordered from smallest to largest:

j Value j Value j Value j Value

1 99.55 6 99.82 11 99.98 16 100.26
2 99.56 7 99.83 12 100.02 17 100.27
3 99.62 8 99.85 13 100.06 18 100.33
4 99.65 9 99.9 14 100.17 19 100.41
5 99.79 10 99.96 15 100.23 20 100.47

• yj are plotted versus F-1( (j-0.5)/n) where F has a normal distribution with
the sample mean (99.99 sec) and sample variance (0.28322 sec2)

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3. Identifying the Distribution (3): Quantile-
Quantile Plots (4)
Example (continued): Check whether the door installation times follow a
normal distribution.

Straight line,
supporting the
hypothesis of a
normal distribution

Superimposed
density function of
the normal
distribution

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3. Identifying the Distribution (3): Quantile-
Quantile Plots (5)
Consider the following while evaluating the linearity of a Q-Q plot:
• The observed values never fall exactly on a straight line
• The ordered values are ranked and hence not independent, unlikely for the
points to be scattered about the line
• Variance of the extremes is higher than the middle. Linearity of the points
in the middle of the plot is more important.
Q-Q plot can also be used to check homogeneity
• Check whether a single distribution can represent two sample sets
• Plotting the order values of the two data samples against each other. A
straight line shows both sample sets are represented by the same
distribution

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4. Parameter Estimation (1)

Next step after selecting a family of distributions

If observations in a sample of size n are X1, X2, …, Xn (discrete or continuous),
the sample mean and variance are defined as:
i1 X i i1 i
n n
X 2
 nX 2

X S2 
n n 1

If the data are discrete and have been grouped in a frequency distribution:

 j 1 f j X j 
n n
j 1
f j X 2
j  n X 2

X S2 
n n 1
where fj is the observed frequency of value Xj

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4. Parameter Estimation (2)

When raw data are unavailable (data are grouped into class intervals), the
approximate sample mean and variance are:

 j 1 f j m j  j 1 j j
c n
f m 2
 nX 2

X S2 
n n 1

where fj is the observed frequency of in the jth class interval; mj is the midpoint of the jth
interval, and c is the number of class intervals

A parameter is an unknown constant, but an estimator is a statistic.

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4. Parameter Estimation (3) Suggested
Estimators
Distribution Parameters Suggested Estimator

Poisson 

̂  X
Exponential 
ˆ  1
X
Normal ,2
ˆ  X
ˆ 2  S 2 (Unbiased)

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4. Parameter Estimation (4)

Vehicle Arrival Example (continued): Table in the histogram example on slide 7 (Table 9.1 in
book) can be analyzed to obtain:
n  100, f1  12, X 1  0, f 2  10, X 2  1,...,

 
k k
and j 1
f j X j  364, and j 1
f j X j  2080
2

• The sample mean and variance are

364
X  3.64
100
2080  100 * (3.64) 2
S 
2

99
 7.63

• The histogram suggests X to have a Possion distribution

– However, note that sample mean is not equal to sample variance.
– Reason: each estimator is a random variable, is not perfect.
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5. Goodness-of-Fit Tests (1)

Conduct hypothesis testing on input data distribution using:

• Kolmogorov-Smirnov test
• Chi-square test
Goodness-of-fit tests provide helpful guidance for evaluating the suitability of a
potential input model
No single correct distribution in a real application exists.
• If very little data are available, it is unlikely to reject any candidate
distributions
• If a lot of data are available, it is likely to reject all candidate distributions

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5. Goodness-of-Fit Tests (2):
Chi-Square test (1)
Intuition: comparing the histogram of the data to the shape of the candidate
density or mass function
Valid for large sample sizes when parameters are estimated by maximum
likelihood
By arranging the n observations into a set of k class intervals or cells, the test
statistics is:
k
(Oi  Ei ) 2 Expected Frequency
 02  
i 1
Ei
Ei = n*pi
where pi is the theoretical
Observed prob. of the ith interval.
Frequency
Suggested Minimum = 5

which approximately follows the chi-square distribution with k-s-1 degrees of

freedom, where s = # of parameters of the hypothesized distribution estimated by the
sample statistics.

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5. Goodness-of-Fit Tests (2):
Chi-Square test (2)
The hypothesis of a chi-square test is:
H0: The random variable, X, conforms to the distributional
assumption with the parameter(s) given by the estimate(s).
H1: The random variable X does not conform.

If the distribution tested is discrete and combining adjacent cell is not required
(so that Ei > minimum requirement):
• Each value of the random variable should be a class interval, unless
combining is necessary, and

pi  p(xi )  P(X  xi )

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5. Goodness-of-Fit Tests (2):
Chi-Square test (3)
If the distribution tested is continuous:
ai
pi   ai 1
f ( x) dx  F (ai )  F (ai 1 )
where ai-1 and ai are the endpoints of the ith class interval
and f(x) is the assumed pdf, F(x) is the assumed cdf.

• Recommended number of class intervals (k):

Sample Size, n Number of Class Intervals, k

20 Do not use the chi-square test
50 5 to 10
100 10 to 20
1/2
> 100 n to n/5

• Caution: Different grouping of data (i.e., k) can affect the hypothesis testing
result.
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5. Goodness-of-Fit Tests (2):
Chi-Square test (4)
Vehicle Arrival Example (continued) (See Slides 7 and 19):
The histogram on slide 7 appears to be Poisson
From Slide 19, we find the estimated mean to be 3.64
Using Poisson pmf:
 e   x

p( x)   x! , x  0,1,2,...
0, otherwise
For =3.64, the probabilities are:
p(0)=0.026 p(6)=0.085
p(1)=0.096 p(7)=0.044
p(2)=0.174 p(8)=0.020
p(3)=0.211 p(9)=0.008
p(4)=0.192 p(10)=0.003
p(5)=0.140 p(11)=0.001

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5. Goodness-of-Fit Tests (2):
Chi-Square test (5)
Vehicle Arrival Example (continued):
H0: the random variable is Poisson distributed.
H1: the random variable is not Poisson distributed.

xi Observed Frequency, Oi Expected Frequency, Ei (Oi - Ei)2/Ei Ei  np ( x)

0 12 2.6
7.87 e   x
1
2
10
19
9.6
17.4 0.15
n
3 17 21.1 0.8
x!
4 19 19.2 4.41
5 6 14.0 2.57
6 7 8.5 0.26
7 5 4.4
8 5 2.0
9 3 0.8 11.62 Combined because
10 3 0.3
> 11 1 0.1 of min Ei
100 100.0 27.68

• Degree of freedom is k-s-1 = 7-1-1 = 5, hence, the hypothesis is rejected at the

0.05 level of significance.
2 2
 0  27.68   0.05,5  11 .1
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5. Goodness-of-Fit Tests (2):
Chi-Square test (5)
Chi-square test can accommodate estimation of parameters
Chi-square test requires data be placed in intervals
Changing the number of classes and the interval width affects the
value of the calculated and tabulated chi-sqaure
A hypothesis could be accepted if the data grouped one way and
rejected another way
Distribution of the chi-square test static is known only
approximately. So we need other tests

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5. Goodness-of-Fit Tests (3):
Kolmogorov-Smirnov Test
Intuition: formalize the idea behind examining a q-q plot
Recall from Chapter 7.4.1:
• The test compares the continuous cdf, F(x), of the hypothesized
distribution with the empirical cdf, SN(x), of the N sample observations.
• Based on the maximum difference statistics (Tabulated in A.8):
D = max| F(x) - SN(x)|
A more powerful test, particularly useful when:
• Sample sizes are small,
• No parameters have been estimated from the data.
When parameter estimates have been made:
• Critical values in Table A.8 are biased, too large.
• More conservative.

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5. Goodness-of-Fit Tests (3):
p-Values and “Best Fits” (1)
p-value for the test statistics
• The significance level at which one would just reject H0 for the given test
statistic value.
• A measure of fit, the larger the better
• Large p-value: good fit
• Small p-value: poor fit

Vehicle Arrival Example (cont.):

• H0: data is Possion
• Test statistics:  02  27.,68with 5 degrees of freedom
• p-value = 0.00004, meaning we would reject H0 with 0.00004 significance
level, hence Poisson is a poor fit.

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5. Goodness-of-Fit Tests (3):
p-Values and “Best Fits” (2)
Many software use p-value as the ranking measure to automatically determine
the “best fit”.
• Software could fit every distribution at our disposal, compute the test statistic
for each fit and choose the distribution that yields largest p-value.
Things to be cautious about:
• Software may not know about the physical basis of the data, distribution
families it suggests may be inappropriate.
• Close conformance to the data does not always lead to the most appropriate
input model.
• p-value does not say much about where the lack of fit occurs
Recommended: always inspect the automatic selection using graphical methods.

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6. Multivariate and Time-Series Input
Models (1)
Multivariate:
• For example, lead time and annual demand for an inventory model, increase
in demand results in lead time increase, hence variables are dependent.
Time-series:
• For example, time between arrivals of orders to buy and sell stocks, buy and
sell orders tend to arrive in bursts, hence, times between arrivals are
dependent.

Co-variance and Correlation are measures of the

linear dependence of random variables

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6. Multivariate and Time-Series Input Models
(2): Covariance and Correlation (1)
Consider the model that describes relationship between X1 and X2:

( X 1  1 )   ( X 2   2 )    is a random
variable with mean 0
and is independent
  = 0, X1 and X2 are statistically independent of X2

  > 0, X1 and X2 tend to be above or below their means together

  < 0, X1 and X2 tend to be on opposite sides of their means

Covariance between X1 and X2 :

cov( X 1 , X 2 )  E[( X 1  1 )( X 2   2 )]  E ( X 1 X 2 )  1 2

= 0, =0
• where cov(X1, X2) < 0, then  <0
> 0, >0
Co-variance can take any value between - to 
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6. Multivariate and Time-Series Input Models
(2): Covariance and Correlation (2)
Correlation normalizes the co-variance to -1 and 1.
Correlation between X1 and X2 (values between -1 and 1):
cov( X 1 , X 2 )
  corr ( X 1 , X 2 ) 
 1 2

= 0, =0
• where corr(X1, X2) < 0, then  <0
> 0, >0
• The closer  is to -1 or 1, the stronger the linear relationship is between X1
and X2.

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6. Multivariate and Time-Series Input Models (3): Auto
Covariance and Correlation
A “time series” is a sequence of random variables X1, X2, X3, … , are
identically distributed (same mean and variance) but dependent.
• Consider the random variables Xt, Xt+h
• cov(Xt, Xt+h) is called the lag-h autocovariance
• corr(Xt, Xt+h) is called the lag-h autocorrelation
• If the autocovariance value depends only on h and not on t, the time series
is covariance stationary

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6. Multivariate and Time-Series Input Models (4):
Multivariate Input Models (1)

If X1 and X2 are normally distributed, dependence between them can be

modeled by the bi-variate normal distribution with 1, 2, 12, 22 and
correlation 
• To Estimate 1, 2, 12, 22, see “Parameter Estimation” (Section 9.3.2 in
book)
• To Estimate , suppose we have n independent and identically distributed
pairs (X11, X21), (X12, X22), … (X1n, X2n), then:

1 n
côv( X 1 , X 2 )  
n  1 j 1
( X 1 j  Xˆ 1 )( X 2 j  Xˆ 2 )

1  n 
 
 
n  1  j 1
ˆ ˆ
X 1 j X 2 j  nX 1 X 2 

côv( X 1 , X 2 )
ˆ 
ˆ1ˆ 2 Sample deviation
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6. Multivariate and Time-Series Input Models (4):
Multivariate Input Models (2)
Algorithm to generate bi-variate normal random variables
Generate Z1 and Z2, two independent standard normal random variables (see
Slides 38 and 39 of Chapter 8)
Set X1 = 1 + 1Z1
Set X2 = 2 + 2(Z1+ Z2 1  ) 2

Bi-variate is not appropriate for all multivariate-input modeling problems

It can be generalized to the k-variate normal distribution to model the
dependence among more than two random variables

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6. Multivariate and Time-Series Input Models (4):
Multivariate Input Models (3)
Example: X1 is the average lead time to deliver in months and X2 is the
annual demand for industrial robots.
Data for this in the last 10 years is shown:

Lead time Demand

6.5 103
4.3 83
6.9 116
6.0 97
6.9 112
6.9 104
5.8 106
7.3 109
4.5 92
6.3 96
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6. Multivariate and Time-Series Input Models (4):
Multivariate Input Models (4)
From this data we can calculate:

X 1  6.14, ˆ1  1.02; X 2  101.8, ˆ 2  9.93

Correlation is estaimted as:

10

X
j 1
1j X 2 j  6328.5

cov  [6328.5  (10)(6.14)(101.80)] /(10  1)  8.66

8.66
ˆ   0.86
(1.02)(9.93)

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6. Multivariate and Time-Series Input Models (5):
Time-Series Input Models (1)

If X1, X2, X3,… is a sequence of identically distributed, but dependent and

covariance-stationary random variables, then we can represent the process as
follows:
• Autoregressive order-1 model, AR(1)
• Exponential autoregressive order-1 model, EAR(1)
– Both have the characteristics that:

 h  corr( X t , X t  h )   h , for h  1,2,...

– Lag-h autocorrelation decreases geometrically as the lag increases,
hence, observations far apart in time are nearly independent

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6. Multivariate and Time-Series Input Models (5):
Time-Series Input Models (2):AR(1) Time-Series Input
Models (1)
Consider the time-series model:
X t     ( X t 1   )   t , for t  2 ,3,...
where  2 ,  3 ,  are i.i.d. normally distributed with   0 and variance 2

If X1 is chosen appropriately, then

• X1, X2, … are normally distributed with mean = , and variance = /(1-)
• Autocorrelation h = h
To estimate , 2:
côv( X t , X t 1 )
ˆ  X , ˆ 2  ˆ 2 (1  ˆ 2 ) , ˆ 
ˆ 2
where côv( X t , X t 1 ) is the lag-1 autocovariance

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6. Multivariate and Time-Series Input Models (5):
Time-Series Input Models (2):AR(1) Time-Series Input
Models (2)
Algorithm to generate AR(1) time series:
Generate X1 from Normal distribution with mean = , and variance = /(1-
). Set t=2
Generate t from Normal distribution with mean 0 and variance 2
Set Xt=+(Xt-1- )+ t
Set t=t+1 and go to step 2

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6. Multivariate and Time-Series Input Models (5): Time-
Series Input Models (3):EAR(1) Time-Series Input
Models (1)
Consider the time-series model:
X t 1 , with probability 
Xt   for t  2,3,...
X t 1   t , with probability 1-φ
where  2 ,  3 ,  are i.i.d. exponentially distributed with  ε  1/λ, and 0    1

If X1 is chosen appropriately, then

• X1, X2, … are exponentially distributed with mean = 1/
• Autocorrelation h = h , and only positive correlation is allowed.
To estimate : côv( X t , X t 1 )
ˆ  1 / X , ˆ
  ˆ 
ˆ 2
where côv( X t , X t 1 ) is the lag-1 autocovariance

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6. Multivariate and Time-Series Input Models (5):
Time-Series Input Models (3):EAR(1) Time-Series
Input Models (2)
Algorithm to generate EAR(1) time series:
Generate X1 from exponential distribution with mean = 1/. Set t=2
Generate U from Uniform distribution [0,1].
If U , then set Xt=  Xt-1.
Otherwise generate t from the exponential distribtuion with mean 1/
and set Xt=+(Xt-1- )+ t
Set t=t+1 and go to step 2

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6. Multivariate and Time-Series Input Models (5):
Time-Series Input Models (3):EAR(1) Time-Series
Input Models (3)
Example: The stock broker would typically have a large sample of data, but suppose
that the following twenty time gaps between customer buy and sell orders had
been recorded (in seconds): 1.95, 1.75, 1.58, 1.42, 1.28, 1.15, 1.04, 0.93, 0.84,
0.75, 0.68, 0.61, 11.98, 10.79, 9.71, 14.02, 12.62, 11.36, 10.22, 9.20. Standard
calculations give

X  5.2 and ˆ 2  26.7

19

X X
To estimate the lag-1autocorrelation we need
t t 1  924.1
j 1
Thus, cov=[924.1-(20-1)(5,2)2]/(20-1)=21.6 and
ˆ  21.6 26.7  0.8
Inter-arrivals are modeled as EAR(1) process with mean = 1/5.2=0.192 and =0.8
provided that exponential distribution is a good model for the individual gaps

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6. Multivariate and Time-Series Input Models (6):
Normal-to-Anything Transformation (NORTA)
Z is a Normal random variable with cdf (z)
We know R=(z) is uniform U(0,1)
To generate any random variable X that has CDF F(x), we use
the variate method:
X=F-1(R)=F-1((z))
To generate bi-variate non-normal:
Generate bi-variate normal RVs (Z1,Z2)
Use the above transformation
Numerical approximations are needed to inverse

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