Topics for this lecture Setting up an internet

Transcript:Topics for this lecture Setting up an internet:
Topics for this lecture Setting up an internet business Inventory management models Decision tree models Data, where is it? Read Chapter 14 Lecture 19 Inventory Management.XLSX Lecture 19 Decision Tree.XLSX Materials for Lecture 19 Inventory management is about When to re-order How much to order Factors to consider Cost of storage Cost of placing an order Cost of lost sales due to shortage Stochastic demand Delivery time from time order is placed Can you backlog demand Inventory Management & Data Sources Simulate the inventory management problem as a stochastic problem Simulate N periods to test impacts of alternative inventory management schemes Period -- length of time for the problem – week, month Based on the time period for the demand data Also based on order/delivery time Inventory Management Example of a weekly Inv. Management Problem Cost to place an order $200 Cost of a unit purchased $4 Cost of storage for 1 week $3 Cost of each lost sale $10 Price of product sold $25 Weekly demand PDF ~ N(40,6) 2 week delivery time; could be stochastic Beginning inventory 100 Inventory management rule to test: Place order if inventory on hand <= 50 units Amount to order = 150 – inventory on hand KOV = average weekly profit, cost, inventory, revenue Inventory Management Rules for Simulating Inventory Demandt is stochastic Beginning inventoryt = ending inventoryt-1 Supplyt = beginning inventoryt + quantity receivedt Salest = Minimum (demandt or supplyt) Ending Inventoryt = supplyt – salest Quantity receivedt = quantity orderedt-n if it takes “n” periods for the delivery Lost salest = 0.0 If(supplyt > demandt) else Lost salest = demandt – supplyt Calculating Inventory Costs Purchase costst = cost per unit paid for product Order costst = fixed cost to place an order (shipping costs, office expense, delivery processing costs, Fed Ex rush delivery fee, etc.) Storage costst = cost per unit * beginning inventoryt Penalty costst = cost to the business for lost sales or lost salest * cost for perceived lost goodwill Inventory Management Model The model would have 40 to 50 weeks so the startup conditions do not dictate the results for the inventory management rule being analyzed Reorder Point Should firm reorder when inventory < 50? Scenario 40, 50, 60, 70, 80, 90 for the reorder point Order up to amount Should firm reorder a larger amount Scenario 140, 150, 160, 170, 190 Would it be more