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Simulation-Inventory Modelling

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17 views

Simulation-Inventory Modelling

Uploaded by

manasi
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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USE OF

SIMULATION
FOR
INVENTORY
CONTROL
Probabilistic Order-level inventory system
• Length N, at which time the inventory level
is checked
• An order is made to bring the inventory up to
the level M
• Lead time is zero
• Demand is uniform over the period of time

Two ways to avoid shortages

1. Carrying cost
2. Ordering cost
Probabilistic Order-level inventory system
Suppose that the maximum inventory level, M, is 11 units and the review period, N, is
5days. The problem is to estimate, by simulation, the average ending units in inventory
and the number of days when a shortage condition occurs. In this example only 5 cycles
will be shown.

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

Assume: Orders are placed at the close of business and are received for inventory at the
beginning of business as determined by the lead time.
The random-digit assignments for daily demand and lead time are shown below:
Simulation Table for (M,N) Inventory system

The average ending inventory is approximately 3.5 (88/25) units. On 2 of 25 days a shortage condition existed
The Newspaper Seller’s Problem

The paper seller buys the papers for 33 cents each and sells them for 50 cents each. (The lost
profit from excess demand is 17 cents for each paper demanded that could not be provided).
Newspaper not sold at the end of the day are sold as scrap for 5 cents each (salvage value).
Newspapers can be purchased in bundles of 10. Thus, the paper seller can buy 50,60, and so
on. There are three types of news days, “good,” fair,” and “poor,” with probabilities of 0.35,
0.45 and 0.20, respectively for 20 days.
Profit = (Revenue from sales) - (Cost of newspapers) - (Lost profit from excess demand)
+ (Salvage from sale of scrap papers)
Buying Price $0.33

The Newspaper Seller’s Problem Selling Price $0.50


Profit/Loss $0.17
The simulation table for the decision to purchase 70 newspapers is shown in the table
Scrap price $0.05
THANK
YU

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