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inventory management for a particular product,

inventory management for a particular product,

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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To simulate inventory management for a particular product, assume that the per period demand is an integer value quantity which follows the normal distribution with mean and standard deviation 50 and 15, respectively. If the demand exceeds the starting inventory, then the ending inventory would be zero, that is, the "extra" demand is lost. Therefore, the ending inventory level is never negative. Ordering will take place at the end of the period, based on the ending inventory, and the order arrives at the beginning of the next period. The ordering policy is to order 80 units (order quantity is equal to 80 units) when the ending inventory is less than or equal to 30 units (reorder point is 30 units). The cost of placing each inventory order is fixed at $250, and this value does not depend on the quantity ordered. The cost of holding inventory for each period is $5 per unit (holding cost is $5/unit-period). The per period inventory holding cost is computed based on the end of period inventory level. The starting inventory for each period, after the first period, is the ending inventory plus any order quantity from the period before. 1 Inventory Problem 2 3 4 5 6 7 8 9 10 11 A 12 13 14 15 16 17 18 Mean Demand Demand Std Dev Order Quantity Reorder Point Period 1 2 3 4 5 6 7 50 15 80 30 B O More than $17,000 Starting Inv Demand ******* O Less than $11,000 101 102 O $13,000 and $15,000 106 O $11,000 and $13,000 O $15,000 and $17,000 units units units units с **$*85* D Ending Inv 21 66 22 26 43 0 52 E Total Inv Cost Order Cost Holding Cost Order Qty 80 0 80 80 0 80 0 F $250 $5 Order + Inv Cost $355 $330 $360 $380 Suppose all formulas are correctly entered. The simulation is run for 52 periods. The total ordering and inventory holding cost (cell F3) over the entire 52 periods is most often between: $215 $250 $260 G per order per unit-period H
Transcribed Image Text:To simulate inventory management for a particular product, assume that the per period demand is an integer value quantity which follows the normal distribution with mean and standard deviation 50 and 15, respectively. If the demand exceeds the starting inventory, then the ending inventory would be zero, that is, the "extra" demand is lost. Therefore, the ending inventory level is never negative. Ordering will take place at the end of the period, based on the ending inventory, and the order arrives at the beginning of the next period. The ordering policy is to order 80 units (order quantity is equal to 80 units) when the ending inventory is less than or equal to 30 units (reorder point is 30 units). The cost of placing each inventory order is fixed at $250, and this value does not depend on the quantity ordered. The cost of holding inventory for each period is $5 per unit (holding cost is $5/unit-period). The per period inventory holding cost is computed based on the end of period inventory level. The starting inventory for each period, after the first period, is the ending inventory plus any order quantity from the period before. 1 Inventory Problem 2 3 4 5 6 7 8 9 10 11 A 12 13 14 15 16 17 18 Mean Demand Demand Std Dev Order Quantity Reorder Point Period 1 2 3 4 5 6 7 50 15 80 30 B O More than $17,000 Starting Inv Demand ******* O Less than $11,000 101 102 O $13,000 and $15,000 106 O $11,000 and $13,000 O $15,000 and $17,000 units units units units с **$*85* D Ending Inv 21 66 22 26 43 0 52 E Total Inv Cost Order Cost Holding Cost Order Qty 80 0 80 80 0 80 0 F $250 $5 Order + Inv Cost $355 $330 $360 $380 Suppose all formulas are correctly entered. The simulation is run for 52 periods. The total ordering and inventory holding cost (cell F3) over the entire 52 periods is most often between: $215 $250 $260 G per order per unit-period H
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