2. Three Types of Analysis
Predictive modeling (forecasting) analyzes current and
historical facts to make predictions about future events
Enhance the accuracy of your predictions
Risk and scenario modeling (simulation) models future
possible states to derive the likelihood of desired future state
and the influence of the key drivers, and quantifies the risk in
each of the scenarios under consideration
Gain insight to the probability of outcomes
Decision modeling (optimization) finds the best settings for the
controllable key drivers to improve the likelihood of reaching the
preferred future state
Quickly identify the best strategies
3. How to model uncertainty in Excel
and find optimal solutions
4. Simulation (of a Fluid Pump)
Crystal Ball is an extra
tab in Excel
Decisions: inputs
we control
Assumptions:
uncertain input values
Forecasts: simulation
results (formulas).
Cost and Flow Rate
5. Simulation
Define distribution for
each Assumption
(manual or automatic)
6. Simulation
Run thousands of
trials in seconds
Trials pick random
values for each
Assumption, obeying
Distributions
Each result plotted on
the Forecast
distribution
Probability of any
given Flow Rate now
known for standard
design
7. Optimization
GOAL:
Design pump at lowest
cost with acceptable
flow rate
8. Optimization
Optimizer finds
combination of
Decision Variables that
give optimum result
(lowest cost with
acceptable flow)
