Policy Creation
Policy Creation

What should the rules be?

At Princeton Consultants, we have found that one of the most powerful tools for executive and operational policy creation is the combination of simulation and optimization techniques – what we call Optimizing Simulation.

Traditionally pure simulations provide the ability to create very realistic models that can provide the exact impact of various what-if scenarios, allowing the users to vary the input parameters and re-run the simulation.

By contrast, traditional optimization, presented with a set of parameters, can try billions or more combinations to show the best or highest scoring ones, given a set of rules (constraints) and a scoring technique (objective function).

In Optimizing Simulation, we get the best of both by creating a detailed simulation model of the business and then, instead of creating combinations of parameters by hand, we use optimization techniques to seek out the best combinations.

The result, we believe, is a potential revolution in strategic planning that allows businesses to evaluate their highest level decisions faster and more rigorously.

  • For the service network company we helped executive management to evaluate the implications of various strategic choices (the hallmark of simulation) and to provide recommendations (the hallmark of optimization) as to the best set of choices across a very large and complex set of related decisions.
  • For the high frequency hedge fund, we helped the Fund Manager analyze the implications of different risk policies under various market conditions (simulation) and recommend the best set of policies to maximize risk-adjusted return (optimization).
  • For the regional agribusiness, we helped its management rigorously analyze dozens of important strategic questions, from the “optimal” capital investments for the upcoming years, to the differences in loading, scheduling, and other operational policies.