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Presented By: Madhu Priti Sharma: Faculty: Mr. Meenakshi Arora Date: 26 March 2012

The document presents a case study on inventory management for a book store. The store wants to determine the optimal ordering policy to minimize costs. There are two options: order 5 books when inventory is less than 5, or order 6 books when inventory is less than 8. A Monte Carlo simulation over 10 cycles using probabilistic daily demand data and costs is used to evaluate which option provides better results.

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Pardeep Bhatia
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9 views

Presented By: Madhu Priti Sharma: Faculty: Mr. Meenakshi Arora Date: 26 March 2012

The document presents a case study on inventory management for a book store. The store wants to determine the optimal ordering policy to minimize costs. There are two options: order 5 books when inventory is less than 5, or order 6 books when inventory is less than 8. A Monte Carlo simulation over 10 cycles using probabilistic daily demand data and costs is used to evaluate which option provides better results.

Uploaded by

Pardeep Bhatia
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Presented by: Madhu Priti sharma

Faculty: Mr. Meenakshi Arora Date : 26 march 2012

It is the process of designing a model of a real system and conducting experiments with this model for the purpose of understanding the behaviour for the operation of the system.

Objective : Is to get optimum results by way of


minimum annual ordering cost, holding cost etc.

A book store wishes to carry a particular book in stock. Demand is probabilistic & replenishment of stock takes 2 days. Each time an order is placed, the store incurs, An ordering cost = Rs 10 per day. Carrying cost Rs 0.05 per day. The inventory carrying cost is calculated on the basis of stock at the end of each day. The manager of the book store wishes to compare two options for his inventory decision.

Source: Wikipedia

Given:
The probabilities of demand are given below:
Demand(daily)
0 0.05 1 0.10 2 0.30 3 0.45 4 0.10

probability

The two digit random numbers are: 89, 34, 78, 63, 61, 81, 39, 16, 13, 73

Order 5 books when the inventory at the beginning of the day plus orders outstanding is less than books. Order 6 books when the inventory at the beginning of the day plus orders outstanding is less than 8. Using Monte carlo simulatio for 10 cycles, recommend which option the manager should choose.

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