This paper presents a novel system simulation methodology based on the known Monte Carlo technique, used for reliability and failure mode analysis of complex and large systems. The presented approach, called “state-merging and assorted random-testing” (SMART), is particularly applicable to systems involving different types of clusters of identical components, and is ideally suited for simulation of huge memories and similar systems. Simulators based on this approach are insensitive to the number of system components, system reliability or the number of associated spares or standby units, and thus they afford an extremely small simulation time compared to the accelerated Monte Carlo simulation time.