 We have our model set up with a single random variable in this case of demand and if we cycle the model We can see that the profit changes somewhat But we don't know What the overall Outcomes going to be if you think about it running the model once it's kind of like throwing a die It may not be indicative of what the natural probability would be you throw a die and you get a one Does that mean what that's going to be the average value? No, you need to Throw the die many times and that's the point of the Monte Carlo simulation We want to run this simulation many times and not do it manually So here's how we're going to do that if you remember we did a what-if using the Data table and in it we were able to cycle two variables and Compare them over a limited number of iterations, but there's a way we can trick excel into running more than just a few Iterations by using the data table and here's how we're going to do it First thing we need to do and I've set up Beginnings of my table here We want to run this time a thousand trials and we need to have the column Show a thousand so the easiest way to do that besides dragging it out You could drag it if it was only one hundred one thousand not too bad, but if you go to the home tab and fill series Click column because we want the column and we want to start at one go to one thousand and Just click okay and Excel will fill in a thousand points there So that gives us one leg of our data table the other thing we need to do is to put in the table our Random variable here. I'm going to link to demand Which remember is our random variable so we have that value in the table The other thing we want to see though is what the profit is what is the outcome someone to link to that as well Now we've got the beginnings of the table and this is the important part We need to select the whole table remember how we did that and here we're going to use control shift down Error to select that range. It includes the whole thing and I'm going to drag it back up there Now all we need to do is go to data What if analysis? data table Ignore the row input. We're not interested in the rows here. We're interested in the columns So our we need to put in a column cell, but we don't want to have any values there We always want the column cell to be blank. I've made one up here I'm calling it column cell and colored it goldish orange to remind myself not to put anything in that cell ever and Then I just click okay And Excel will run that simulation this time a thousand trials and Give us the demand that comes out of each one of those random trials and the profit that it generates So we've got a lot of good information there I've already gone ahead. I'm going to unhide Some columns I have here and I put in formulas to calculate the mean of that range of profit The standard deviation of that range of profit. There's thousand iterations the men and the max and then using the norm this to calculate the probability of X being less than two hundred and fifty dollars are probably being less than two hundred and fifty dollars You can see that based on this simulation There's about a seventy one percent chance our news boy will make less than two hundred and fifty dollars if He purchases forty two hundred copies and the reason that I put forty two hundred in here was Logically you look down and say with the mean of my distribution the average is forty two hundred So I'm going to buy the average, but in this case We've got some variation and that's what the simulation is showing us that in this case the mean of the profit Would be about two hundred and thirty eight dollars The minimum could be as low as a hundred and sixteen dollars and as much as two hundred and fifty two dollars with about a seventy one percent chance Okay, now that is a single random variable You need to be aware that if your model has more than what's more than one random variable Depending upon how you set it up You may need to include more than just the single random variable in the data table in This variation of the news boy Model I have also changed the purchase quantity into a random Variable and the way I did that was similar to what we did with the demand I'm just going to assume that again It is normally distributed with a mean of forty two hundred and a standard deviation four hundred But I set up a separate random variable down here You notice I've got a cell with the ran function in it and then also the norm and verse function and you might notice right away that the two ran values are Different and that is important that because I'm using two separate excel ran functions They will be different every time you exercise the model you can see when I Calculate the sheet the two ram ran functions return Different values and because the demand and the queue are each link to those separate ran functions the two Values are different and here's why that's important in this first area I set the table up the way I did in the first part of the video just with the Single random variable showing and found the profit and the mean and standard deviation and the second Version I included the second random variable the queue and also found the mean and standard deviation of Those 1,000 simulations and you can see the means are slightly different standard deviations are different and Everything is slightly different because you're including both of those random variables in this particular case It doesn't give you a significantly different answer 78% versus 77% But it might depending upon your model and the difference is some people when they build Models with multiple random variables would link their random variables to the same Ran function you could do that and if you're using a single ran function Then you just need to have a single random variable in your table if you're using multiple ran functions Then you need to have each variable that has a separate ran function in your data table That begs the question why should you use more than one ran function if it just makes you have to do more work? Well, if you think about it, these may be separate processes total demand is Totally different from the purchase quantity So it wouldn't make sense in my mind to have the same same random function The same dice being thrown to determine the purchase quantity and the demand My mind would be that it's better to have separate ran functions Built into these variables as opposed to link them all to ran one ran function unless they all start at the same Genesis and in most problems your variables do not have a common base Therefore you should use separate ran functions