55815 Quantitative Models

Exercise 10

1. Adi Koren, manager of kitchen appliances for the Mashbir Department stores, feels that
her inventory levels of stoves have been running higher than necessary. Before revising
the inventory policy for stoves, she records the number sold each day at the flag store in
Tel Aviv over a period of 25 days, as summarized below:

Number sold 2 3 4 5 6
Number of days 4 7 8 5 1

a) Use the data to estimate the probability distribution of daily sales

2. A supermarket manager orders milk from her supplier on a weekly basis. Based on
previous data the manager estimates the weekly demand distribution to be:

Demand Probability
(boxes)
15 0.2
16 0.25
17 0.4
18 0.15

One box costs 400 NIS and is sold for 700 NIS. Holding costs for an unsold box is 5 NIS
per week. In addition, there is a cost of 10 NIS for every box we are not able to supply.

a) Assuming that the manager orders 16 boxes every week, perform a simulation of 8
weeks and compute the average weekly profit.
b) Explain how your simulation can be extended in order to determine the optimal size
of a weekly order of a fixed number of boxes.

3. Bloomingdale’s is trying to determine how many Balenciaga bags to order next season.
The demand for Balenciaga bags, following analysis from previous years, is distributed
according to the following table:

1
 Lecture 10. Simulation

Demand for bags Probability

According to the agreement, it settles that Bloomingdale’s receives only 80% of the order
it places at the beginning of the season. Later in the season, Bloomingdale’s can claim the
rest of the order (the entire 20%). Each bag is sold at Bloomingdale’s for $320 and costs
Bloomingdale’s $100. If Bloomingdale’s does not claim the rest of the order, it pays $10 for
each bag that was not supplied.
Perform a simulation for six seasons to determine whether the optimal seasonal order size
for Bloomingdale’s is 375 bags or 400.

4. *This problem has a recorded solution (for the first part) and is also in the class material.
Queuing Problem: The Ashdod Port. Ships arriving at Ashdod Port need to be unloaded
and reloaded before leaving. The number of ships arriving in any day ranges from 0 to 5
(see Table 10.1 for the distribution). A study of the port reveals that the number of ships
unloaded varies from day to day. Currently, the unload rate ranges from 1 to 5 ships daily
(see Table 10.2 for the distribution). Ships are unloaded on a first come first served basis.
Any ship not unloaded on the day of arrival must wait until the following day. However,
tying up ships at the port is expensive for the ship owner and carries penalties for the port
owner.

Arrival Probability
0 0.13
1 0.17
2 0.15
3 0.25
4 0.20
5 0.10
Table 10.1: Arrival rates of ships

Unloading Probability
1 0.05
2 0.15
3 0.50
4 0.20
5 0.10
Table 10.2: Unloading rates of ships

Quantitative models 2 Amir Brudner

a) Simulate 15 days of work. What is the total number of days ships are delayed in the
port in this simulation? Use the following random numbers:
For arrivals: 0.52, 0.06, 0.50, 0.88, 0.53, 0.30, 0.10, 0.47, 0.99, 0.37, 0.66, 0.91, 0.35, 0.32,
0.00
For unloading: 0.37, 0.63, 0.28, 0.02, 0.74, 0.35, 0.24, 0.03, 0.29, 0.60, 0.74, 0.85, 0.90,
0.73, 0.59.
b) The port can hire another unloading crew. The cost of that crew for the 15 days is
$20,000. A day of delay cost the port $1,500. The following table gives the distribution
for unloading with two crews:

Unloading Probability
1 0.02
2 0.05
3 0.30
4 0.30
5 0.20
6 0.10
7 0.03

Is it worthwhile to hire the extra crew?

Quantitative models 3 Amir Brudner