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Simulation

Simulation. An Inventory Simulation. Example. Daily demand for refrigerators at Hotpoint City has a probability distribution Lead time is not fixed but has a probability distribution Customers who arrive and find Hotpoint out of stock will shop elsewhere and Hotpoint will lose the sale

jessamine-frye
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Simulation

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  1. Simulation An Inventory Simulation

  2. Example • Daily demand for refrigerators at Hotpoint City has a probability distribution • Lead time is not fixed but has a probability distribution • Customers who arrive and find Hotpoint out of stock will shop elsewhere and Hotpoint will lose the sale • These conditions do not meet the restrictions of inventory models developed earlier

  3. Simulation Approach • Simulation cannot determine the best inventory policy • But it can compare policies • Compare the following: • Reordering 10 when supply reaches 6 or less • Reordering 12 when supply reaches 3 or less

  4. Hotpoint Input Data • Current inventory = 10 • Holding costs: $2/refrigerator/day • Order costs: $50 per order • Shortage costs: $30 per occurrence (sale is lost) Demand/day ProbLead Time Prob 0 .080 days .05 1 .371 day .55 2 .332 days .30 3 .173 days .10 4 .05

  5. RANDOM NUMBER MAPPINGS DAILY DEMAND -- Use column 2 0 1 2 3 4 PROB .08 .37 .33 .17 .05 RN 00-07 08-44 45-77 78-94 95-99 LEAD TIME (DAYS) -- Use column 14 0 1 2 3 PROB .05 .55 .30 .10 RN 00-04 05-59 60-89 90-99

  6. SIMULATION OF Q*= 10; r* = 6 COSTS DAY BI RN DEM EI LOST ORDER RN LT ORD HOLD SHORT 1 10 33 1 9 --- --- --- --- --- 18 --- 2 9 98 4 5 --- YES 24 1 50 10 --- 3 5 26 1 4 --- --- --- 0 --- 8 --- 4 14 91 3 11 --- --- --- --- --- 22 --- 5 11 96 4 7 --- --- --- --- --- 14 --- 6 7 48 2 5 --- YES 63 2 50 10 --- 7 5 82 3 2 --- --- --- 1 --- 4 --- 8 2 27 1 1 --- --- --- 0 --- 2 --- 9 11 96 4 7 --- --- --- --- --- 14 --- 10 7 46 2 5 --- YES 99 3 50 10 --- 150 112 0 Based on this one 10-day simulation average daily cost = $26.20.

  7. SIMULATION OF Q*= 12; r* = 3 COSTS DAY BI RN DEM EI LOST ORDER RN LT ORD HOLD SHORT 1 10 33 1 9 --- --- --- --- --- 18 --- 2 9 98 4 5 --- --- --- --- --- 10 --- 3 5 26 1 4 --- --- --- --- --- 8 --- 4 4 91 3 1 --- YES 37 1 50 2 --- 5 1 96 4 0 3 --- --- 0 --- 0 90 6 12 48 2 10 --- --- --- --- --- 20 --- 7 10 82 3 7 --- --- --- --- --- 14 --- 8 7 27 1 6 --- --- --- --- --- 12 --- 9 6 96 4 2 --- YES 84 2 50 4 --- 10 2 46 2 0 --- --- --- --- --- 0 --- 100 88 90 Based on this one 10-day simulation average daily cost = $27.80. THE OTHER POLICY APPEARS BETTER!

  8. Review • Simulation of Inventory Models -- Comparing 2 Possible Policies • For Each -- Estimate System Parameters Using Pseudorandom Numbers • Simulate Cost • Replicate Experiment or Longer Simulation for better results

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