Assume the role of the inventory manager for Simkin’s Hardware as described in Section 4 on pp. 119-123 (see attached PDF) in the Simulation chapter in Executive Decision Making. Download the initial simulation (see attached Excel file), which uses a reorder policy of order 10 units when inventory falls to 5 or less. The simulation is set up and has been run over 20 days. Answer the following:
Using the initial simulation results, determine the estimated total annual inventory cost using the cost parameters provided in the example. Break out between order cost, holding cost, and stockout cost.
Critically assess the model as given. What assumptions have been made and how may the model be changed or enhanced?
Considering the costs determined in question 1 above, posit 2 additional reorder policies (reorder point and units ordered) that you hypothesize may decrease total annual inventory cost. Run the policies through the 20-day simulation and critically assess the results compared to the initial simulation.
Sample Solution
