Simulation: Inventory Policy for Amy’s Art

Simulation: Inventory Policy for Amy’s Art

A. Based on the calculation for the delivery date, what assumption is being made about lead time?

Response: 1st of all here the Uniform distribution is assumed for lead time which is already discussed. Next for the delivery date the assumption was that, the lead time as obtained is fixed so if we make an order on 5th day and lead time is 5 days then the order is definitely going to deliver on 11th day. This was the assumption.

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This portion of the assignment includes Scenario Manager. Amy would like to investigate other combinations of Q and R to identify the inventory policy that results in the lowest average total cost. She is interested in investigating order quantities of 10 or 12, and reorder points of 5, 6, 7 and 8.

Run the following Scenarios and make the modifications identified. (Q of 12 and R of 6 is the current policy and not included in the scenario manager.) Scenarios:

Order quantity, Q

Reorder point, R

Scenario Name

12

5

Q12R5

12

7

Q12R7

12

8

Q12R8

10

5

Q10R5

10

6

Q10R6

10

7

Q10R7

10

8

Q10R8

“Names”:

Name the “result” cells in that you created in the data table. These are the values for the different types of cost.

Run the scenarios described above. The costs are the result cells.

1. Based on the results from the scenarios, what inventory policy do you recommend? Explain to Amy why you recommend this policy.

2. Are there other scenarios that should be considered? Why? If so, run 200 simulations to explore other policy options and report your findings.

3. Are there other variables that you would include in Scenario Manager to assist Amy in her decision? (Exclude demand, lead time distributions, and cost.)

4. Refer to question A at the very top. How would you model lead time? Describe assumptions and appropriate statistical distributions. Justify your answer.

5. Change the lead time to vary from 0 to 1 and rerun Scenario Manager. Comment on the results and implications for inventory management.

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