Surrogate-Based Simulation Optimization

Abstract

Simulation models are widely used in practice to facilitate decision making in a complex, dynamic and stochastic environment. But they are computationally expensive to execute and optimize because of a lack of analytical tractability. Simulation optimization is concerned with developing efficient sampling schemes—subject to computational budgets—to solve such optimization problems. To mitigate the computational burden, surrogates are often constructed using simulation outputs to approximate the response surface of the simulation model. In this tutorial, we provide an up-to-date overview of surrogate-based methods for simulation optimization with continuous decision variables. Typical surrogates, including linear basis function models and Gaussian processes, are introduced. Surrogates can be used as either local approximations or global approximations. Depending on the choice, one may develop algorithms that converge to either a local optimum or a global optimum. Representative examples are presented for each category. Recent advances in large-scale computation for Gaussian processes are also discussed.