Reference no: EM132257848

Assignment:

Using Simulation, we're going to evaluate the effects of changing capacities on holding cost. To do this, you will need to run several simulations: one to estimate the holding cost with the current capacities and several others to estimate the holding cost with other capacity values.

You can change the capacities by changing the maximum and/or minimum capacity values in the Decision variables box at the top of the Model sheet.

CAUTION: Since pressing the F9 key changes all of the data in the spreadsheet, you will need to copy the Summary sheet for each of the simulation runs to a separate worksheet where they remain unchanged regardless of how many times you push F9. That way you can analyze your result data without it having been changed all the time. Use Copy --> Paste Special... --> Values to do this.

Answer the following questions by typing them in a word document:

1. Would you expect holding cost to go down with increases in maximum capacity? Explain your answer.

2. Could the actual pattern be different from the expected one? Explain your answer.

3. Run your model to test your hypothesis formulated under question 1. What happens to the holding costs when you increase the maximum capacity for all five process steps from 6 to 7? Do the holding costs follow the expected pattern? If not, why not? In your answer consider both the mean of and variation in holding costs. Also consider the percentage of shipped gifts?

4. Would you expect the capacity increase to have an effect on slack (idle capacity)? Would you include slack effects in your decision to increase or not increase capacity? What, according to your model, will be the effect of the capacity increase on slack?

5. What happens with holding cost and slack when instead of increasing the maximum capacity for all steps from 6 to 7, we increase the minimum capacity for all steps from 1 to 2?

Why is the effect on holding cost of changing the minimum capacities by 1 so much bigger than the effect of increasing the maximum capacities by 1?

6. Next, instead of setting the maximum capacity of all steps in the process from 6 to 7, set only the maximum capacities of steps 4 and step 5 to 7 while leaving all others at 6. Also, at the same time, set the minimum capacity back to 1. What do you observe when you run the model?

7. Make a recommendation for the optimum capacity at each step for this business. In your analysis, carefully consider averages, minimum values, maximum values and variation. (Hint: You may want to try some model runs with capacity configurations other than the ones we have recommended above.

Keep in mind that a hold at step 5 ($7) is seven times as expensive as a hold at step 1 ($1). Also keep in mind that as you hold fewer gifts, you have to tell fewer customers that their gift orders are not yet ready and that they have to come back the next day - meaning more satisfied customers.)

Attachment:- Simulation.rar