HW7Solutions PDF
HW7Solutions PDF
HW7Solutions PDF
Fall 2015
Homework 7 - Solutions
October 5, 2015
1. Daily demand for paint brushes at a particular store follows the demand distribution:
d
P (D = d)
0
.5
1
.15
2
.3
3
.03
4
.02
The stock level is reviewed every evening and when warranted an order is placed at the central warehouse to augment stock. Orders arrive over night and are available to meet the demand on the morning
of the next day. The fixed cost for placing an order at the end of the day is $0.2 and the per unit order
cost is $0.05, the daily per unit holding cost is is $0.01 and each brush sells at $0.5 (unfulfilled orders
are lost).
(1) Calculate the stationary distribution.
(2) Compute the long run expected daily profit under the following inventory policies:
(a) If the number of brushes at the end of the day is 3 or less, the management orders enough brushes
to bring the on hand inventory to 6 brushes.
If we order when the stock level is less than or equal to 3, then transition matrix and stationary
distribution of Xn is as follows
0
0
0.02 0.03 0.3 0.15 0.5
0
0
0.02 0.03 0.3 0.15 0.5
0
0
0.02 0.03 0.3 0.15 0.5
0
0.02 0.03 0.3 0.15 0.5
P =
.
0
0
0.02 0.03 0.3 0.15 0.5
0
0
0
0.02 0.03 0.3 0.15 0.5
To find the stationary distribution, we can use the following R code:
install.packages("DTMCPack")
library(DTMCPack)
values <- c(0,0,0,0,0.02,0,0,0,0,0,0,0.03,0.02,0,
0.02,0.02,0.02,0.02,0.3,0.03,0.02,0.03,0.03,0.03,0.03,0.15,0.3,0.03,
0.3,0.3,0.3,0.3,0.5,0.15,0.3,0.15,0.15,0.15,0.15,0,0.5,0.15,
0.5,0.5,0.5,0.5,0,0,0.5);
mymatrix <- matrix(values,nrow=7,ncol=7);
statdistr(mymatrix)
= 0.0069 0.0134 0.1186 0.1123 0.3467 0.1508 0.2513 .
For each stock level, the cost will be as following table:
Stock level
(i)
0
1
2
3
4
5
6
Holding
Fixed
0 0.01
1 0.01
2 0.01
3 0.01
4 0.01
5 0.01
6 0.01
0.2
0.2
0.2
0.2
0
0
0
Ordering
Cost
6 0.05
5 0.05
4 0.05
3 0.05
0
0
0
1
E[Sales]
C(i)
0.5 E[6 D]
0.5 E[6 D]
0.5 E[6 D]
0.5 E[6 D]
0.5 E[4 D]
0.5 E[5 D]
0.5E[6 D]
-0.5 + 0.46=-0.04
-0.46 + 0.46=0
-0.42 + 0.46=0.04
-0.38 + 0.46=0.08
-0.04 + 0.46=0.42
-0.05 + 0.46=0.41
-0.06 + 0.46=0.40
E[6 D] = E[5 D] = E[4 D] = 0 0.5 + 1 0.15 + 2 0.3 + 3 0.03 + 4 0.02 = 0.92 Thus,
long-run expected profit is
6
X
i=0
0
0
0.02 0.03 0.3 0.15 0.5
0
0
0.02 0.03 0.3 0.15 0.5
0
0
0.02
0.03 0.3 0.15 0.5
0
0.02 0.03 0.3 0.15 0.5
P =
.
0
0
0
0.02
0.03
0.3
0.15
0.5
0.0046
0.0223
0.0923
0.2654
0.2308
0.3846
Holding
Fixed
0 0.01
1 0.01
2 0.01
3 0.01
4 0.01
5 0.01
6 0.01
0.2
0.2
0.2
0.2
0.2
0
0
Ordering
Cost
6 0.05
5 0.05
4 0.05
3 0.05
2 0.05
0
0
E[Sales]
C(i)
0.5 E[6 D]
0.5 E[6 D]
0.5 E[6 D]
0.5 E[6 D]
0.5 E[6 D]
0.5 E[5 D]
0.5E[6 D]
-0.5 + 0.46=-0.04
-0.46 + 0.46=0
-0.42 + 0.46=0.04
-0.38 + 0.46=0.08
-0.34 + 0.46=0.12
-0.05 + 0.46=0.41
-0.06 + 0.46=0.40
i=0
0
1
0
0
0
0.3
0
0.7
P =
2
2
2
0
0.3
0.3
0.7
0.7
1
3
3
2
1
1
2
0.33
0.73
2 0.3 0.7
1 0.3 0.7
The process is Markovian because the probability of states in time n + 1 only depends on the
state in time n as shown in the transition matrix.
(b) Given that one machine is working today, what is the probability that no machine will be working
tomorrow?
P10 = 0
(c) Given that no machine is working today, what is the probability that no machine will be working
five days later?
Note that
P6 =
0.00946836 0.168766 0.470703 0.351063
0.00948808 0.168813 0.470589 0.35111
6
Thus P00
= 0.00959531.