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Inventory Management Simulation Analysis

The document outlines an inventory management simulation problem focused on optimizing order sizes for desk calendars over a 20-week period. The goal is to minimize costs by analyzing demand and lead times, with specific costs associated with ordering and shortages. Key findings include a total cost of Rs 1,800 for the simulation period, resulting in an average weekly cost of Rs 90.

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4 views10 pages

Inventory Management Simulation Analysis

The document outlines an inventory management simulation problem focused on optimizing order sizes for desk calendars over a 20-week period. The goal is to minimize costs by analyzing demand and lead times, with specific costs associated with ordering and shortages. Key findings include a total cost of Rs 1,800 for the simulation period, resulting in an average weekly cost of Rs 90.

Uploaded by

fahadzardari555
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd

Inventory

Management
Simulation
Problem
Presented By:
21SW044

21SW047
INTRODUCTION
An inventory management problem in simulation involves
determining when and how much to order while accounting for
demand and lead times.

The simulation helps analyze performance and costs under various


scenarios.
PROBLEM STATEMENT
The wholesaler must optimize order size for desk calendars through a 20-week simulation of probabilistic demand
and lead times.

The goal is to minimize the cost by determining an effective inventory policy.

Objectives:

Calculate: Calculate:
Average Ending Inventory Total average weekly cost.
COST STRUCTURE & INVENTORY POLICY
1. Cost of Ordering 2. Shortage Cost 3. Replenishment Policy
Each order costs Rs 100/order. Shortages result in a cost of Rs Orders are placed when the
20 per units. inventory level is equal to or
below 50 units, replenishing
stock to a maximum level of
100 units.
DEMAND AND LEAD TIME
Definitions: Data:
Demand: It refers to the quantity of a product that Random digits for weekly demand are:
customers are willing to purchase in a given period.
82, 19, 67, 45, 31, 90, 25, 73, 58, 41, 13, 88, 76, 34, 59,
Lead time: It is the duration between placing an order 28, 64, 49, 71, 56.
and receiving the ordered items.
Random digits for lead time are:

46, 91, 35, 72, 18.


ASSUMPTIONS
1 2

Beginning Inventory No Backorders


Start with 80 units. No Backorders are Permitted

3 4

Order Placement Replenishment Timing


order are placed at the beginning of the following Orders are received at the beginning of the week.
week the fall of inventory drops to 50 units or
below.
Random Digit Assignment For Demand and Lead
Demand/week (thousand units) Lead Time (weeks)

Demand Probabil Cumulat Random Lead Time Probabil Cumulat Random


ity ive Number ity ive Number
Probabil Range Probabil Range
ity ity

10 0.3 0.3 01-30 1 0.3 0.3 01-30

20 0.4 0.7 31-70 2 0.4 0.7 31-70

30 0.2 0.9 71-90 3 0.3 1.0 71-00

40 0.1 1.0 91-00


Columns For Inventory Simulation Table

Weeks Beginning Inventory Random Digit for Demand

Demand Ending Inventory Random Digit For Lead Time

Lead Time Quantity Ordered Shortage Cost


Simulation Table
The following table represents the 20-week simulation of the inventory management problem.
Formulas and Calculations
Average Ending Inventory
Average Ending Inventory can be calculated by adding the weekly ending inventory balances (ignoring negative) and dividing by number of w

Total Ending Inventory (non-negative): 510

Number of Weeks: 20

Final Answer
Total Ordering Cost: 6 orders were placed @ Rs 100/order = Rs 600

Total Shortage Cost: 60 total units of lost sales @ Rs 20/unit = Rs 1,200

Total Cost for 20 Weeks: Rs 600 + Rs 1800 = Rs 1,800

Total Average Weekly Cost: Rs 1,800 / 20 weeks = Rs 90 per week

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