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SIMULATION EXAMPLES. INVENTORY SYSTEMS. Inventory Systems. Assume periodic review, i.i.d. random demands, constant (possibly non-zero) lead times and full backlogging. When to order? How much to order?. Inventory Costs. Ordering Cost setup cost for placing an order, K
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SIMULATION EXAMPLES INVENTORY SYSTEMS
Inventory Systems • Assume periodic review, i.i.d. random demands, constant (possibly non-zero) lead times and full backlogging. • When to order? • How much to order?
Inventory Costs • Ordering Cost • setup cost for placing an order, K • per-unit ordering cost, c • order amount, Qi • Holding (Storage) Cost • per-period per-unit of inventory, h • inventory level, Xi • Shortage (Unsatisfied Demand) Cost • per-period per-unit of inventory, p (s, S) inventory control policy is optimal for this cost structure IGLEHART, 1963
(s,S) Ordering Policy • When the inventory position (inventory level + quantity on order) falls to or below the level s, place an order to bring the inventory position up to S.
Inputs and State Variables • Demand in period i, Di • Constant lead time, L • Cost Information (K, c, h, p) • Inventory control policy parameters (s, S) – decision variables • Before ordering • Inventory level at period i, Xi: (On hand) – (Backorders) • Inventory position at period i, Yi: (Inventory level) + (On order) • Order quantity at period i, Qi
Problem Formulation Period i
Inventory Simulation in Excel • http://ie.bilkent.edu.tr/~ie324/Inventory.xls • Lead time: 1 period • Demand: Uniform over {0,1,2,3,….,10} (Integer valued)
