Edwin Masiror 18241785
Refective report inventory basics Reflecting on the simulations conducted of the adjustable ad justable wrenches and the rock salt which is a representation of reality, by the use of the inventory simulation model that will react in the same manner as reality when inventory management is conducted, the main aim of the reflection report is to analyze the simulation runs over the twelve weeks and come up with strategies of order quantity and reorder point while looking at having the smallest total inventory cost, which include ordering cost, holding cost and lost opportunity cost as this are the main costs that every business try to keep it at a minimum level to ensure profits are made(Ryzin made( Ryzin & Mahajan !!!"# !!!"# $rom my reflections in the simulation of the adjustable wrench, the demand is close to predictable and also considering that it has a lower standard deviation of one, from the several simulations % conducted the average demand was ', considering that there are two decision variables that is of order quantity and reorder point with two probability probab ility components that is the weekly demand and the reorder lead time and ordering costs(Melouk costs(Melouk et al# ')"# ')"# *efore % started my simulation there are si+ aspects % considered • • • • • •
*eginning inventory Reorder point rder quantity -ost of placing an order .olding cost per unit /ost opportunity costs
% based my strategies looking at the three costs that is the ordering costs, holding costs and lost opportunity costs, by realizing that the strategy that % would use would be focused on anticipation of consumer demand(0lock demand(0lock '", '", by looking at future assumptions of demand by looking at historical data and by this % anticipated the reorder level and since the ordering cost was fi+ed whether one was ordering one single adjustable wrench or '' adjustable wrenches the reorder cost was 12#) and the only way of reducing the ordering costs was by applying the economic order quantity which is ordering 3' units of adjustable wrenches over a period of four weeks while looking at making savings on ordering costs and increasing the holding cost since the holding cost per unit is 1'#'4 and would translate to 1)# for the 56 of 3' units and much much cheaper when considering that % would have ordered weekly it would have increased inventory costs# 7ince the reorder level and safety stock for the adjustable wrench is , having a reorder level of 3' units every 4 weeks was economically viable as costs are reduced and the risks of incurring lost opportunity costs are reduced since the safety safety stock is maintained maintained at all times during the weeks of the simulation, from my simulations % managed to get inventory costs of 1)#84 by applying the economic order or der quantity, which which reduces my ordering costs and eliminates lost opportunity costs but increases the holding costs, but by a small margin compared to the other two costs, specifically the lost opportunity costs which is 1'#
1
Edwin Masiror 18241785
From the second simulation of rock salt I noticed that although the mean demand is 20 units the is a high standard deviation of com!ared to the ad"usta#le wrench which had one$ from this i denoted that orders can var% u! to times on average meaning that the average might #e 20 #ut it can get lower or higher #% units& van 'onselaar ( )roekmeulen 201*+, 201* +, )% knowing the main strateg% is antici!ation of consumer demand and minimi-ing inventor% costs and making them as low as !ossi#le$ I noticed that the main !ro#lem was determining the o!timal re!lenishment level and ensuring that I don.t incur lost o!!ortunit% costs since from m% trials at the simulation I either encountered encountered high holding costs since I was afraid of lost o!!ortunit% costs or reducing the holding costs and incurring the lost o!!ortunit% cost, /he strateg% I a!!lied was to use the #ell curve which shows the !ro#a#ilit% !ro#a#ilit% of the stock falling under a certain level, hile also using the economic order uantit% of 0 units ever% * weeks while having a reorder level of 41 units including safet% stock, I was a#le to kee! the ordering costs down while increasing the holding cost and since the rock salt simulation had a high standard deviation some weeks had high holding costs or I was forced to reorder as the demand ke!t shifting, From the simulations I was a#le to get inventor% costs of 345,01 since the rock salt simulation had a high standard deviation,
2
Edwin Masiror 18241785
Reerences lock$ 6 2012$ ead time reduction reduction strategies in a single9vendor:sin single9vendor:single9#u%er gle9#u%er integrated inventor% model with lot si-e9de!endent lead times and stochastic demand$ International International Journal of Production Economics $ vol, 1*$ no, 1$ !!, *7944, Melouk$ ;6$ Freeman$ Freeman$ <=$ Miller$ ' ( 'unning$ M 201*$ ;imulation o!timi-ation9 #ased decision su!!ort tool for steel manufacturing$ manufacturing$ International International Journal of Production Economics$ Economics $ vol, 141$ no, 1$ !!, 297, >%-in$ v ( Maha"an$ ; 1$ ?n the relationshi! #etween inventor% costs and variet% #ene@ts in retail assortments$ Management Science$ Science $ vol, 45$ no, 11$ !!, 14950, van 'onselaar$ =6 ( )roekmeulen$ )roekmeulen$ >A 201*$ 'etermination of safet% stocks in a lost sales inventor% s%stem with !eriodic review$ !ositive lead9time$ lot9si-ing and a target @ll rate$ International International Journal of Production Economics $ vol, 14*$ no, 2$ !!, 44098,
*
