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Simulation

The document details two inventory simulation problems, the first involving daily demand and initial inventory calculations over five days, resulting in a shortage on the last day. The second problem estimates average ending inventory and shortage days over five cycles, starting with an inventory of 3 units and an order of 8 units. The average ending inventory is approximately 3.5 units with shortages occurring on 2 out of 25 days.

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sashenkamagenta
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4 views

Simulation

The document details two inventory simulation problems, the first involving daily demand and initial inventory calculations over five days, resulting in a shortage on the last day. The second problem estimates average ending inventory and shortage days over five cycles, starting with an inventory of 3 units and an order of 8 units. The average ending inventory is approximately 3.5 units with shortages occurring on 2 out of 25 days.

Uploaded by

sashenkamagenta
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Inventory Simulation

Problem No 1: Numbers representing a full inventory system were given daily demand: 4,3,8,2,5. The
beginning inventory is 4 units. The demand probability is-

Demand 0 1 2
Probability 0.2 0.5 0.3

To solve Problem 1:

We are asked to simulate a full inventory system where:

• Daily demand (units): 0, 1, 2

• Probability: 0.2, 0.5, 0.3

• Initial inventory: 4 units

Steps:

1. Generate cumulative probabilities for the given demand probabilities:

o 0 → 0.2

o 1 → 0.7 (0.2 + 0.5)

o 2 → 1.0 (0.2 + 0.5 + 0.3)

2. Map random numbers to demand levels using the cumulative probabilities:

o Random number ≤ 0.2 → Demand = 0

o 0.2 < Random number ≤ 0.7 → Demand = 1

o 0.7 < Random number ≤ 1.0 → Demand = 2

3. Perform the simulation for 5 days using the random numbers provided: 4, 3, 8, 2, 5.

Convert the random numbers to probabilities by dividing by 10 (assuming the range is 0-9).

Simulation:

Day 1:

• Random number = 4 → Probability = 0.4

• Demand = 1 (0.2 < 0.4 ≤ 0.7)

• Begin inventory = 4

• End inventory = 4 - 1 = 3

Day 2:

• Random number = 3 → Probability = 0.3

• Demand = 1 (0.2 < 0.3 ≤ 0.7)

• Begin inventory = 3
• End inventory = 3 - 1 = 2

Day 3:

• Random number = 8 → Probability = 0.8

• Demand = 2 (0.7 < 0.8 ≤ 1.0)

• Begin inventory = 2

• End inventory = 2 - 2 = 0

Day 4:

• Random number = 2 → Probability = 0.2

• Demand = 0 (≤ 0.2)

• Begin inventory = 0 (No inventory left)

• End inventory = 0 - 0 = 0

Day 5:

• Random number = 5 → Probability = 0.5

• Demand = 1 (0.2 < 0.5 ≤ 0.7)

• Begin inventory = 0 (No inventory left)

• End inventory = 0 - 1 = -1 (Shortage)

Final Results:

• Day 1: Begin = 4, Demand = 1, End = 3

• Day 2: Begin = 3, Demand = 1, End = 2

• Day 3: Begin = 2, Demand = 2, End = 0

• Day 4: Begin = 0, Demand = 0, End = 0

• Day 5: Begin = 0, Demand = 1, End = -1


Problem No 2: Suppose the maximum inventory level, M, is 11 units and the review period, N, is 5 days.
The problem is to estimate, by simulation, the average ending units in inventory and the number of days
when a Shortage condition occurs.

The distribution of the number of units demanded per day is shown in Table 2.19.

Random-Digit for demand: 24, 35, 65, 81, 54, 03, 87, 27, 73, 70, 47, 45, 48, 17, 09, 42, 87, 26, 36, 40, 07, 63,
19, 88, 94.

In this example, lead time is a random variable, as shown in Table 2.20.

Random-digit for lead time: 5, 0, 3, 4, 8.

Assume that orders are placed at the close of business and are received for inventory at the beginning of
Business as determined by the lead time.

For purposes of this example, only five cycles will be shown.

The simulation started with the inventory level at 3 units and an order of 8 units scheduled to arrive in 2
days.

Table: 2.19: Random-digit assignment for daily demand.

Demand Probability Cumulative probability Random-digit


assignment
0 0.10 0.10 01-10
1 0.25 0.35 11-35
2 0.35 0.70 36-70
3 0.21 0.91 71-91
4 0.09 1.00 92-100

Table: 2.20: Random-digit assignment for Lead time.

Lead Time (Days) Probability Cumulative probability Random-digit


assignment
1 0.6 0.6 1-6
2 0.3 0.9 7-9
3 0.1 1.0 0

Cycle Days Beginning RD for Demand Ending Shortage Order RD for Days
inventory demand Inventory quantity Quantity lead until
time order
arrival
1 3 24 1 2 0 1
2 2 35 1 1 0 0
1 3 65
4 81
5 54
1 03
2
2 3
4
5
The simulation started with the inventory level at 3 units and an order of 8 units scheduled to arrive in 2
days. The lead time for this order was 1 day.

Notice that the beginning inventory on the second day of the third cycle was zero. An order for 2 units on
that day led to a shortage condition. The units were backordered on that day and the next day also. On the
morning of day 4 of cycle 3 there was a beginning inventory of 9 units. The 4 units that were backordered
and the 1 unit demanded that day reduced the ending inventory to 4 units.

Based on five cycles of simulation, the average ending inventory is approximately 3.5 (88 25) units. On 2
of 25 days a shortage condition existed.

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