Modeling 7: More Complex Models

Markov chains, queuing theory, inventory theory, decision analysis and simulation are examples of probabilistic models useful to analytical loss prevention and analysis. A Markov chain consists of a set of sequential stochastic events that are independent of each other.

An example of a Markov Chain could be a typical alarm response. A specific alarm may or may not activate; if it does, it may or may not be a false alarm; if it is an actual alarm, force may or may not be required; if force is used, it may or may not be deadly physical force.

Based on this chain, the probability that deadly force will be required for any given alarm activation can be estimated. Queuing Theory and inventory theory focus on moving things or people (entities) through a system. They can help to answer questions like, “How long can I expect screening facility lines to be?” or “Where are the Risk Points of Failure in my Package Delivery Process” or “How many widgets do I need to keep in stock?”

Most of these techniques are complementary. In fact, most complex systems and issues require a combination of these tools if planners are to understand the interrelationships fully and work them toward an optimal solution.

Linear Programming is a deterministic, mathematical, problem-solving technique. It is used optimize a specific goal, such as minimizing cost or maximizing profit.

Monte Carlo simulation is commonly used in Risk Analysis, a technique for applying probability theory to business problems to build probabilistic models. We will demonstrate a fairly complex risk-based Security and Loss Prevention model later in this blog. These models enable Loss Prevention and Security management to make decisions under uncertainty (such as how should I deploy my staff and budget to minimize risk).

Simulation and role playing are most useful in decision-making when:

· The environment is changing.
· There are conflicts among the people involved.
· There is little accurate data on the intentions of the relevant people.
· The decision is important.

Sounds perfectly suited for use by Loss Prevention and Security Professionals doesn’t it?