Inventory management consultant

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Reference no: EM13335855

Question Set 1.

You are an inventory management consultant. You have been hired by Trader Joe’s to help optimize their inventory reordering points for pineapples. Specifically, you will set up a Monte Carlo simulation to find profit-maximizing reorder points for pineapples. The daily demand distribution for pineapples is:

Probability Demand

0.05 25

0.1 30

0.2 35

0.15 40

0.25 45

0.2 50

0.05 55

Trader Joe’s is open every day and may order pineapples on any day. Working days are considered to start at 8am and last for 24 hours. Orders are placed between 4am and 5am and arrive between 6am and 7am the same day. The cost of an order is assessed on the working day it is placed; an order placed at 4:30am Friday morning would have the cost assessed on Thursday, since the new working day starts at 8am Friday. Orders may be placed for boxes of 100 pineapples at a shipping cost of $20. The store pays $150 per box and sells each pineapple for $3.49. At the end of each day, pineapples may spoil and need to be thrown out. We will use the following simplified spoilage formula. If the day’s ending inventory is in cell E10, the spoilage formula would be “=INT(RAND()*E10*0.3 + 0.5)”.

1. Build a table for the cumulative probability distribution for demand. It should be set up for use with the VLOOKUP function and have the cumulative probabilities on the left. (5pts)

2. Build a table for tracking sales and inventory of pineapples for four weeks (Sunday through Saturday). Assume inventory on the first day is 50 pineapples. For order quantities, assume an order (for 100 pineapples) is placed if inventory after spoilage is less than 45. Your table will need columns for:

• Beginning Inventory

• Demand (randomly found from the distribution in 1., above)

• Sales

• Ending Inventory

• Spoilage

• Order Size

Remember, sales should be the smaller of beginning inventory and demand. Spoilage should be applied after ending inventory is calculated. Order size should consider the inventory level after spoilage is applied; the person ordering checks for spoilage immediately before placing the order. (15pts)

3. Build a table for tracking costs and revenues for the four weeks’ pineapple sales. This should use the information provided in your answer to 2., above. Your table will need entries for:

• Revenue

• Goods Cost (based on each day’s orders)

• Shipping Cost ($20 for each time an order is placed)

• Profit/Loss (revenue minus costs)

When calculating profit (or loss) for the four weeks, you can ignore the first day’s initial inventory and the last day’s ending inventory. (10pts)

4. Create a cell with the total profit/loss for the four weeks and color it orange. Create a data table (as was done in lab 9) showing the profit/loss result of 100 simulation runs. Create a cell with the average total profit for the 100 runs and color it green. As in previous assignments, this must be an actual data table structure to earn full credit. (10pts)

Reference no: EM13335855

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