Optimize Reorder Point in Inventory Management
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ScribdTranslationsOptimize Reorder Point in Inventory Management
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ScribdTranslationsGroup B
Suppose we are considering the selection of the reorder point, R, of a (Q,R) inventory policy.
With this policy, we order up to Q when the inventory level falls to R or less. The probability
distribution of daily demand is given in Table 22. The lead time is also a random variable and
has
the distribution in Table 23. We assume that the “order up to” quantity for each order stays the
same at 100. Our interest here is to determine the value of the reorder point, R, that minimizes
the total variable inventory cost. This variable cost is the sum of the expected inventory
carrying cost, the expected ordering cost, and the expected stockout cost. All stockouts are
backlogged. That is, a customer waits until an item is available. Inventory carrying cost is
estimated to be
20¢/unit/day and is charged on the units in inventory at the end of a day. A stockout costs $1
for every unit short. The cost of ordering is $10 per order. Orders arrive at the beginning of a
day. Develop a simulation model to simulate this inventory system to find the best value of R.
Group B
7 Let’s assume we are considering the selection of the reorder point, R, of a (Q, R)
inventory policy. With this policy, we order up to Q when the inventory level drops to R
or less. The probability distribution of daily demand is given in Table 22. The deadline for
execution is also a random variable and has
the distribution in Table 23. We assume that the 'order up to' quantity for each order is
remains the same at 100. Our interest here is to determine the value of the reorder point, R, which
minimize the total cost of variable inventory. This variable cost is the sum of the costs of
expected inventory maintenance, the expected cost of orders, and the cost of
expected shortages. All shortages are delayed. That is, a customer
wait until an item is available. Inventory holding cost is estimated
in
20 ¢ / unit / day and it is charged on the units in inventory at the end of a day. In the absence of
The inventory costs $1 for each unit ordered. The cost to place an order is $10 per order.
Orders arrive at the start of a day. Develop a simulation model to simulate this.
inventory system to find the best value of R.
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