Simulation of Periodic Review Inventory System in Excel (Improved)

I n d u s t r i a l & P r o d u c t i o n E n g i n e e r i n g

2012

Simulation of Supercrete Cement dealer’s Inventory System

K.M. Mostafizur Rahman Sobuj

SUST

This PDF file contains its original document file and excel file as attachments

(Use office 2010 for better performance)

Let me know if it helped you! Or if you’ve made any development in the logic

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mailto:[email protected]

Name of the topic: Simulation of Supercrete Cement dealer’s Inventory System

Objectives:

1. To assist the dealer in reorganizing the inventory system (maximum inventory level,

review period, other inventory model, etc.) if necessary.

2. To assist the dealer in gaining better control over the inventory system.

3. To generate an insight view of overcoming stock out related risk.

4. To assist the dealer in reorganizing the suppliers network (inclusion or exclusion of one

or more suppliers) if necessary.

Problem statement: In University gate the dealer of Supercrete Cement has the capacity to

store maximum 50,000 bags of cement in their inventory, but they usually keep 18000 bags of

cement in off season (maximum inventory level M) & 27000 bags of cement in peak season.

They use fixed time period model to replenish the inventory stock. The review period N, is 3

days. Lead time is a random variable, but it falls in the range of 1 to 2 days. The dealer gets

demand in random manner which falls in the range of 2000 to 3100 bags of cement/per day in off

season and 3150 to 5200 bags of cement in peak season. For simplicity they usually place orders

at the end of the day and replenish the inventory stock at the beginning of the day. Now we’d

like to estimate the average ending units in inventory, the number of days when a shortage

condition occurs and the average order quantity by simulation and also try to improve the model.

Components of this system:

Entity: Cement bags

Attribute: Demand, Lead time.

Activity: Filling demand from inventory, replenishing inventory stock from order.

State: Number of inventory shortage in stock.

Event: Getting demand from customers.

Introduction: A simulation is the imitation of the operation of a real-world process or system

over time. Whether done by hand or on a computer, simulation involves the generation of an

artificial history of a system, and the observation of that artificial history to draw inferences

concerning the operating characteristics of the real system.

An important class of simulation problems involves inventory systems. This inventory system

has a periodic review of length T, at which time the inventory level is checked. An order is made

to bring the inventory up to the level M. At the end of the first review period, an order quantity,

Q1, is placed. Since demands are not usually known with certainty, the order quantities are

probabilistic.

Steps In Our Simulation Study:

1. Concept generation: For our project at first we generated two ideas:

a. Queuing system of Sonali Bank and

b. Supercrete Cement’s dealer Inventory System.

We selected these two topics because it was relatively easy to collect the relevant data for

us. As already one of our groups submitted their topic on Dutch Bangla Bank’s queuing

system that’s why most of the members of our group agreed to perform our simulation

project on the Supercrete Cement’s dealer Inventory System. Besides our course teacher

encouraged us to perform our simulation on this topic.

2. Setting of objectives:

To estimate the average ending units in inventory.

To estimate the number of days when a shortage condition occurs.

To estimate the average order quantity.

To find out an optimal Inventory level

For this purpose we have used spreadsheet to analyze the data and the objectives.

3. Model conceptualization:

We have visited the dealer of Supercrete cement. In there we have discussed with them

about the current model. After that we decided which type of data should be collected.

4. Data collection:

We have collected data from their database over last 12 months.

Though the maximum capacity to store is 50,000 bags of cement but they usually keep

18000 bags of cement in off season and 27000 bags of cement in peak season.

Maximum inventory level in off season M = 18000 bags.

Maximum inventory level in peak season M = 27000 bags.

They use fixed time period model to replenish the inventory stock.

The review period T = 3 days.

Lead time is a random variable, but it falls in the range of 1 to 2 days.

The dealer gets demand in random manner which usually falls in the range of 2000 to

3100 bags of cement/per day in off season & 3150 to 5200 bags of cement in peak

season. For simplicity they usually place orders at the end of the day and replenish the

inventory stock at the beginning of the day.

0

2

4

6

8

10

12

14

16

18

20

2000 2200 2400 2500 2700 2800 2900 3000 3100

Days

Demand

5. Probability distribution and random number from collected data:

From the collected data we have generated probability distribution demand and lead time

and we have also generated the random numbers for demands and lead time.

This demand data follows the normal distribution,

4 Month Data For Demand In Off Season

Demand Days Probability Cumulative Probability

Random Digit assignment (From) (To)

2000 9 0.075 0.075 001 075

2200 12 0.100 0.175 076 175

2400 14 0.117 0.292 176 292

2500 16 0.133 0.425 293 425

2700 19 0.158 0.583 426 583

2800 15 0.125 0.708 584 708

2900 13 0.108 0.817 709 817

3000 12 0.100 0.917 818 917

3100 10 0.083 1.000 918 000

Total= 120

0

5

10

15

20

25

30

3150

3250

3450

3500

3750

3900

4000

4250

4500

4700

4800

5000

5200

Days

This demand data also follows the normal distribution

12 Month Data For Lead Time, L

Lead time (Days)

Times Probability Cumulative probability

Random digit assignment (From) (To)

1 97 0.81 0.81 01 81

2 23 0.19 1.00 82 00

Total= 120

After generating probability distribution we have put those data in spreadsheet in logical manner.

At first we have performed simulation for the existing inventory system. Then we’ve performed

simulation for our proposed inventory model.

8 Month Data For Demand In Peak Season

Demand Days Probability Cumulative Probability

Random Digit assignment (From) (To)

3150 11 0.046 0.046 001 046

3250 14 0.058 0.104 047 104

3450 17 0.071 0.175 105 175

3500 19 0.079 0.254 176 254

3750 22 0.092 0.346 255 346

3900 25 0.104 0.450 347 450

4000 27 0.113 0.563 451 563

4250 23 0.096 0.658 564 658

4500 21 0.088 0.746 659 746

4700 18 0.075 0.821 747 821

4800 16 0.067 0.888 822 888

5000 15 0.063 0.950 889 950

5200 12 0.050 1.000 951 000

Total= 240

Simulation of existing model (off season): The beginning inventory was 10,000 bags of cement and 8000 bags of cement order was already placed, the order will reach

the destination after 2 days.

Inventory level = 18000 Beginning inventory = 10000 Initial order = 8000

Cycle Day Beginning Inventory

Random Digits for Demand

Demand Ending Inventory

Shortage Quantity

Order Quantity

Random digit for lead time

Generated Lead time

Days until Order Arrives

Order received?

Ending inventory

just before the day order

received

1 10000 837 3000 7000 0 - - - 1 No -

1 2 7000 069 2000 5000 0 - - - 0 No 5000

3 13000 899 3000 10000 0 8000 78 1 1 Received -

1 10000 248 2400 7600 0 - - - 0 No 7600

2 2 15600 413 2500 13100 0 - - - - Received -

3 13100 857 3000 10100 0 7900 07 1 1 No -

1 10100 400 2500 7600 0 - - - 0 No 7600

3 2 15500 838 3000 12500 0 - - - - Received -

3 12500 944 3100 9400 0 8600 59 1 1 No -

1 9400 725 2900 6500 0 - - - 0 No 6500

4 2 15100 219 2400 12700 0 - - - - Received -

3 12700 456 2700 10000 0 8000 30 1 1 No -

1 10000 477 2700 7300 0 - - - 0 No 7300

5 2 15300 830 3000 12300 0 - - - - Received -

3 12300 042 2000 10300 0 7700 15 1 1 No -

1 10300 053 2000 8300 0 - - - 0 No 8300

6 2 16000 700 2800 13200 0 - - - - Received -

3 13200 468 2700 10500 0 7500 55 1 1 No -

1 10500 154 2200 8300 0 - - - 0 No 8300

7 2 15800 436 2700 13100 0 - - - - Received -

3 13100 001 2000 11100 0 6900 80 1 1 No -

1 11100 332 2500 8600 0 - - - 0 No 8600

8 2 15500 242 2400 13100 0 - - - - Received -

3 13100 552 2700 10400 0 7600 71 1 1 No -

1 10400 740 2900 7500 0 - - - 0 No 7500

9 2 15100 622 2800 12300 0 - - - - Received -

3 12300 098 2200 10100 0 7900 39 1 1 No -

1 10100 732 2900 7200 0 - - - 0 No 7200

10 2 15100 933 3100 12000 0 - - - - Received -

3 12000 425 2500 9500 0 8500 77 1 1 No -

1 9500 926 3100 6400 0 - - - 0 No 6400

11 2 14900 689 2800 12100 0 - - - - Received -

3 12100 062 2000 10100 0 7900 04 1 1 No -

1 10100 037 2000 8100 0 - - - 0 No 8100

12 2 16000 594 2800 13200 0 - - - - Received -

3 13200 200 2400 10800 0 7200 28 1 1 No -

1 10800 625 2800 8000 0 - - - 0 No 8000

13 2 15200 127 2200 13000 0 - - - - Received -

3 13000 038 2000 11000 0 7000 91 2 2 No -

1 11000 211 2400 8600 0 - - - 1 No -

14 2 8600 071 2000 6600 0 - - - 0 No 6600

3 13600 062 2000 11600 0 6400 46 1 1 Received -

1 11600 513 2700 8900 0 - - - 0 No 8900

15 2 15300 865 3000 12300 0 - - - - Received -

3 12300 834 3000 9300 0 8700 27 1 1 No -

1 9300 911 3000 6300 0 - - - 0 No 6300

16 2 15000 515 2700 12300 0 - - - - Received -

3 12300 854 3000 9300 0 8700 95 2 2 No -

1 9300 501 2700 6600 0 - - - 1 No -

17 2 6600 988 3100 3500 0 - - - 0 No 3500

3 12200 469 2700 9500 0 8500 99 2 2 Received -

1 9500 705 2800 6700 0 - - - 1 No -

18 2 6700 071 2000 4700 0 - - - 0 No 4700

3 13200 948 3100 10100 0 7900 71 1 1 Received -

1 10100 357 2500 7600 0 - - - 0 No 7600

19 2 15500 461 2700 12800 0 - - - - Received -

3 12800 725 2900 9900 0 8100 04 1 1 No -

1 9900 896 3000 6900 0 - - - 0 No 6900

20 2 15000 230 2400 12600 0 - - - - Received -

3 12600 560 2700 9900 0 8100 98 2 2 No -

1 9900 622 2800 7100 0 - - - 1 No -

21 2 7100 388 2500 4600 0 - - - 0 No 4600

3 12700 776 2900 9800 0 8200 63 1 1 Received -

1 9800 063 2000 7800 0 - - - 0 No 7800

22 2 16000 103 2200 13800 0 - - - - Received -

3 13800 440 2700 11100 0 6900 44 1 1 No -

1 11100 596 2800 8300 0 - - - 0 No 8300

23 2 15200 327 2500 12700 0 - - - - Received -

3 12700 567 2700 10000 0 8000 55 1 1 No -

1 10000 128 2200 7800 0 - - - 0 No 7800

24 2 15800 608 2800 13000 0 - - - - Received -

3 13000 950 3100 9900 0 8100 18 1 1 No -

1 9900 589 2800 7100 0 - - - 0 No 7100

25 2 15200 785 2900 12300 0 - - - - Received -

3 12300 071 2000 10300 0 7700 35 1 1 No -

1 10300 295 2500 7800 0 - - - 0 No 7800

26 2 15500 571 2700 12800 0 - - - - Received -

3 12800 822 3000 9800 0 8200 15 1 1 No -

1 9800 165 2200 7600 0 - - - 0 No 7600

27 2 15800 761 2900 12900 0 - - - - Received -

3 12900 311 2500 10400 0 7600 75 1 1 No -

1 10400 567 2700 7700 0 - - - 0 No 7700

28 2 15300 527 2700 12600 0 - - - - Received -

3 12600 942 3100 9500 0 8500 86 2 2 No -

1 9500 989 3100 6400 0 - - - 1 No -

29 2 6400 597 2800 3600 0 - - - 0 No 3600

3 12100 340 2500 9600 0 8400 51 1 1 Received -

1 9600 172 2200 7400 0 - - - 0 No 7400

30 2 15800 837 3000 12800 0 - - - - Received -

3 12800 821 3000 9800 0 8200 96 2 2 No -

1 9800 121 2200 7600 0 - - - 1 No -

31 2 7600 580 2700 4900 0 - - - 0 No 4900

3 13100 899 3000 10100 0 7900 42 1 1 Received -

1 10100 487 2700 7400 0 - - - 0 No 7400

32 2 15300 343 2500 12800 0 - - - - Received -

3 12800 319 2500 10300 0 7700 59 1 1 No -

1 10300 387 2500 7800 0 - - - 0 No 7800

33 2 15500 684 2800 12700 0 - - - - Received -

3 12700 690 2800 9900 0 8100 82 2 2 No -

1 9900 934 3100 6800 0 - - - 1 No -

34 2 6800 739 2900 3900 0 - - - 0 No 3900

3 12000 384 2500 9500 0 8500 65 1 1 Received -

1 9500 073 2000 7500 0 - - - 0 No 7500

35 2 16000 206 2400 13600 0 - - - - Received -

3 13600 298 2500 11100 0 6900 23 1 1 No -

1 11100 291 2400 8700 0 - - - 0 No 8700

36 2 15600 878 3000 12600 0 - - - - Received -

3 12600 956 3100 9500 0 8500 59 1 1 No -

1 9500 996 3100 6400 0 - - - 0 No 6400

37 2 14900 345 2500 12400 0 - - - - Received -

3 12400 309 2500 9900 0 8100 96 2 2 No -

1 9900 652 2800 7100 0 - - - 1 No -

38 2 7100 144 2200 4900 0 - - - 0 No 4900

3 13000 262 2400 10600 0 7400 66 1 1 Received -

1 10600 189 2400 8200 0 - - - 0 No 8200

39 2 15600 690 2800 12800 0 - - - - Received -

3 12800 904 3000 9800 0 8200 47 1 1 No -

1 9800 120 2200 7600 0 - - - 0 No 7600

40 2 15800 133 2200 13600 0 - - - - Received -

3 13600 267 2400 11200 0 6800 11 1 1 No -

1 11200 388 2500 8700 0 - - - 0 No 8700

41 2 15500 340 2500 13000 0 - - - - Received -

3 13000 627 2800 10200 0 7800 50 1 1 No -

1 10200 122 2200 8000 0 - - - 0 No 8000

42 2 15800 277 2400 13400 0 - - - - Received -

3 13400 289 2400 11000 0 7000 22 1 1 No -

1 11000 951 3100 7900 0 - - - 0 No 7900

43 2 14900 956 3100 11800 0 - - - - Received -

3 11800 963 3100 8700 0 9300 87 2 2 No -

1 8700 332 2500 6200 0 - - - 1 No -

44 2 6200 745 2900 3300 0 - - - 0 No 3300

3 12600 423 2500 10100 0 7900 35 1 1 Received -

1 10100 895 3000 7100 0 - - - 0 No 7100

45 2 15000 711 2900 12100 0 - - - - Received -

3 12100 753 2900 9200 0 8800 95 2 2 No -

1 9200 035 2000 7200 0 - - - 1 No -

46 2 7200 827 3000 4200 0 - - - 0 No 4200

3 13000 222 2400 10600 0 7400 47 1 1 Received -

1 10600 890 3000 7600 0 - - - 0 No 7600

47 2 15000 439 2700 12300 0 - - - - Received -

3 12300 966 3100 9200 0 8800 56 1 1 No -

1 9200 936 3100 6100 0 - - - 0 No 6100

48 2 14900 788 2900 12000 0 - - - - Received -

3 12000 812 2900 9100 0 8900 08 1 1 No -

1 9100 729 2900 6200 0 - - - 0 No 6200

49 2 15100 342 2500 12600 0 - - - - Received -

3 12600 727 2900 9700 0 8300 17 1 1 No -

1 9700 948 3100 6600 0 - - - 0 No 6600

50 2 14900 241 2400 12500 0 - - - - Received -

3 12500 356 2500 10000 0 8000 21 1 1 No -

1 10000 960 3100 6900 0 - - - 0 No 6900

51 2 14900 339 2500 12400 0 - - - - Received -

3 12400 292 2500 9900 0 8100 49 1 1 No -

1 9900 707 2800 7100 0 - - - 0 No 7100

52 2 15200 228 2400 12800 0 - - - - Received -

3 12800 620 2800 10000 0 8000 09 1 1 No -

Average ending

inventory

9478 Average ending inventory in review period

10052 Avg. order 7948 Shortage= 0 Avg. daily demand

Demand=

2649

Average lead time = 1.19 Mean demand during (T+L) periods = 11107

Standard deviation of daily demand = 333.79 Standard deviation of demand during (T+L) periods =

683.45 Average Ending inventory just before the day order received =

6877

Order up to level should be = 14942 Performance of current model = 61.79%

Analysis of current model (Off season):

1. We’ve simulated the current model for 52 cycles (156 days) to get a steady state

condition.

2. Average daily demand is 2649 units.

3. Average lead time 1.19 days.

4. Average ending inventory is 9478 units.

5. Average ending inventory in review period is 10052 units.

6. The average ending inventory just before the day order received is 6877 units which is

about ((6877 100)/18000) = 38.21 % of the stock level and it’s quite high.

7. Average ending inventory in the review period is 11755 units it’s about (10052/2649)

= 3.8 times of the average demand which is also quite high!

8. There is no shortage condition.

9. Inbound-outbound performance of current model can be determined by following

manner, = (Total inventory outbound in T+L period/inventory level)

= (Current inventory level- Inventory left in stock just before the day order arrive) /

(Current Inventory level)

= ((18000-6877)/18000)

= 61.79%

Problem identification from the existing inventory model:

1. As the average ending inventory is very high with respect to the stock level. For this

reason holding cost is very high which affects profitability.

2. Comparing with the demand during lead time and considering safety stock, average

cycle inventory is also very high which ultimately affects the total inventory cost.

3. As maximum inventory level is very high so that a large amount of space of total

capacity remains unused that affects the total inventory cost.

4. As the performance level is low that’s why a large amount of capital will tied-up and

remain unused. That’s why an optimal policy is required to solve this problem.

Determination of an optimal Inventory level:

For periodic review policy Order up to level point is determined by, OUL= DT+L+SS

Where,

DT+L= Mean demand during T+L period

SS = Safety stock.

As because this model has no backordering system, that’s why the safety stock should be

good enough to support the uncertainty of demand and lead time without stock out risk.

That’s why we’ve assumed the cycle service level very high for meeting any uncertainty of

demand and lead time without the risk of stock out. (This service level adopted by trial &

error method from observing its impact on proposed model)

In this case, we have,

Average daily demand, D = 2649 units

Standard deviation of daily demand, σD = 333.79

Average lead time for replenishment, L = 1.19 days.

Review interval, T = 3 days.

Mean demand during T+L period, DT+L= (3+1.19) 2649 = 11107 units.

Standard deviation of demand during T+L period = √ = √

= 683.45

SS= NORMSINV (0.99999999) Standard deviation of demand during T+L period

= 5.61 683.45 = 3483.15 units.

So the Inventory level should be = DT+L + SS = 14941.15 15000 units

Proposed new Inventory level is 15000 units with the same demand pattern and lead

time.

The proposed model’s simulation is shown below,

Simulation of proposed model (off season): The beginning inventory was 10,000 bags of cement and 5000 bags of cement order was already placed, the order will

reach the destination after 2 days.





Shortage Quantity

Order Quantity


Generated Lead time


Order received?

Ending inventory just before the

day order received

1 10000 629 2800 7200 0 - - - 1 No -

1 2 7200 734 2900 4300 0 - - - 0 No 4300

3 9300 698 2800 6500 0 8500 16 1 1 Received -

1 6500 712 2900 3600 0 - - - 0 No 3600

2 2 12100 548 2700 9400 0 - - - - Received -

3 9400 827 3000 6400 0 8600 24 1 1 No -

1 6400 321 2500 3900 0 - - - 0 No 3900

3 2 12500 104 2200 10300 0 - - - - Received -

3 10300 719 2900 7400 0 7600 79 1 1 No -

1 7400 423 2500 4900 0 - - - 0 No 4900

4 2 12500 433 2700 9800 0 - - - - Received -

3 9800 406 2500 7300 0 7700 01 1 1 No -

1 7300 471 2700 4600 0 - - - 0 No 4600

5 2 12300 530 2700 9600 0 - - - - Received -

3 9600 770 2900 6700 0 8300 07 1 1 No -

1 6700 013 2000 4700 0 - - - 0 No 4700

6 2 13000 920 3100 9900 0 - - - - Received -

3 9900 791 2900 7000 0 8000 23 1 1 No -

1 7000 933 3100 3900 0 - - - 0 No 3900

7 2 11900 080 2200 9700 0 - - - - Received -

3 9700 762 2900 6800 0 8200 83 2 2 No -

1 6800 980 3100 3700 0 - - - 1 No -

8 2 3700 643 2800 900 0 - - - 0 No 900

3 9100 269 2400 6700 0 8300 13 1 1 Received -

1 6700 769 2900 3800 0 - - - 0 No 3800

9 2 12100 186 2400 9700 0 - - - - Received -

3 9700 328 2500 7200 0 7800 84 2 2 No -

1 7200 788 2900 4300 0 - - - 1 No -

10 2 4300 342 2500 1800 0 - - - 0 No 1800

3 9600 858 3000 6600 0 8400 94 2 2 Received -

1 6600 249 2400 4200 0 - - - 1 No -

11 2 4200 663 2800 1400 0 - - - 0 No 1400

3 9800 490 2700 7100 0 7900 73 1 1 Received -

1 7100 253 2400 4700 0 - - - 0 No 4700

12 2 12600 155 2200 10400 0 - - - - Received -

3 10400 427 2700 7700 0 7300 97 2 2 No -

1 7700 748 2900 4800 0 - - - 1 No -

13 2 4800 539 2700 2100 0 - - - 0 No 2100

3 9400 575 2700 6700 0 8300 25 1 1 Received -

1 6700 810 2900 3800 0 - - - 0 No 3800

14 2 12100 594 2800 9300 0 - - - - Received -

3 9300 246 2400 6900 0 8100 15 1 1 No -

1 6900 204 2400 4500 0 - - - 0 No 4500

15 2 12600 063 2000 10600 0 - - - - Received -

3 10600 663 2800 7800 0 7200 42 1 1 No -

1 7800 994 3100 4700 0 - - - 0 No 4700

16 2 11900 720 2900 9000 0 - - - - Received -

3 9000 803 2900 6100 0 8900 30 1 1 No -

1 6100 195 2400 3700 0 - - - 0 No 3700

17 2 12600 537 2700 9900 0 - - - - Received -

3 9900 634 2800 7100 0 7900 05 1 1 No -

1 7100 437 2700 4400 0 - - - 0 No 4400

18 2 12300 969 3100 9200 0 - - - - Received -

3 9200 819 3000 6200 0 8800 78 1 1 No -

1 6200 936 3100 3100 0 - - - 0 No 3100

19 2 11900 312 2500 9400 0 - - - - Received -

3 9400 036 2000 7400 0 7600 60 1 1 No -

1 7400 262 2400 5000 0 - - - 0 No 5000

20 2 12600 067 2000 10600 0 - - - - Received -

3 10600 749 2900 7700 0 7300 89 2 2 No -

1 7700 966 3100 4600 0 - - - 1 No -

21 2 4600 491 2700 1900 0 - - - 0 No 1900

3 9200 588 2800 6400 0 8600 72 1 1 Received -

1 6400 838 3000 3400 0 - - - 0 No 3400

22 2 12000 498 2700 9300 0 - - - - Received -

3 9300 023 2000 7300 0 7700 97 2 2 No -

1 7300 949 3100 4200 0 - - - 1 No -

23 2 4200 088 2200 2000 0 - - - 0 No 2000

3 9700 833 3000 6700 0 8300 12 1 1 Received -

1 6700 797 2900 3800 0 - - - 0 No 3800

24 2 12100 283 2400 9700 0 - - - - Received -

3 9700 061 2000 7700 0 7300 19 1 1 No -

1 7700 824 3000 4700 0 - - - 0 No 4700

25 2 12000 976 3100 8900 0 - - - - Received -

3 8900 059 2000 6900 0 8100 40 1 1 No -

1 6900 476 2700 4200 0 - - - 0 No 4200

26 2 12300 600 2800 9500 0 - - - - Received -

3 9500 878 3000 6500 0 8500 46 1 1 No -

1 6500 213 2400 4100 0 - - - 0 No 4100

27 2 12600 425 2500 10100 0 - - - - Received -

3 10100 655 2800 7300 0 7700 09 1 1 No -

1 7300 178 2400 4900 0 - - - 0 No 4900

28 2 12600 899 3000 9600 0 - - - - Received -

3 9600 035 2000 7600 0 7400 97 2 2 No -

1 7600 520 2700 4900 0 - - - 1 No -

29 2 4900 257 2400 2500 0 - - - 0 No 2500

3 9900 709 2900 7000 0 8000 61 1 1 Received -

1 7000 786 2900 4100 0 - - - 0 No 4100

30 2 12100 863 3000 9100 0 - - - - Received -

3 9100 110 2200 6900 0 8100 14 1 1 No -

1 6900 564 2700 4200 0 - - - 0 No 4200

31 2 12300 107 2200 10100 0 - - - - Received -

3 10100 846 3000 7100 0 7900 02 1 1 No -

1 7100 250 2400 4700 0 - - - 0 No 4700

32 2 12600 458 2700 9900 0 - - - - Received -

3 9900 184 2400 7500 0 7500 90 2 2 No -

1 7500 531 2700 4800 0 - - - 1 No -

33 2 4800 726 2900 1900 0 - - - 0 No 1900

3 9400 045 2000 7400 0 7600 00 2 2 Received -

1 7400 043 2000 5400 0 - - - 1 No -

34 2 5400 545 2700 2700 0 - - - 0 No 2700

3 10300 274 2400 7900 0 7100 68 1 1 Received -

1 7900 417 2500 5400 0 - - - 0 No 5400

35 2 12500 098 2200 10300 0 - - - - Received -

3 10300 085 2200 8100 0 6900 81 2 2 No -

1 8100 125 2200 5900 0 - - - 1 No -

36 2 5900 737 2900 3000 0 - - - 0 No 3000

3 9900 443 2700 7200 0 7800 71 1 1 Received -

1 7200 929 3100 4100 0 - - - 0 No 4100

37 2 11900 933 3100 8800 0 - - - - Received -

3 8800 800 2900 5900 0 9100 31 1 1 No -

1 5900 237 2400 3500 0 - - - 0 No 3500

38 2 12600 623 2800 9800 0 - - - - Received -

3 9800 607 2800 7000 0 8000 72 1 1 No -

1 7000 143 2200 4800 0 - - - 0 No 4800

39 2 12800 171 2200 10600 0 - - - - Received -

3 10600 662 2800 7800 0 7200 94 2 2 No -

1 7800 247 2400 5400 0 - - - 1 No -

40 2 5400 975 3100 2300 0 - - - 0 No 2300

3 9500 955 3100 6400 0 8600 05 1 1 Received -

1 6400 431 2700 3700 0 - - - 0 No 3700

41 2 12300 245 2400 9900 0 - - - - Received -

3 9900 020 2000 7900 0 7100 65 1 1 No -

1 7900 688 2800 5100 0 - - - 0 No 5100

42 2 12200 414 2500 9700 0 - - - - Received -

3 9700 669 2800 6900 0 8100 28 1 1 No -

1 6900 112 2200 4700 0 - - - 0 No 4700

43 2 12800 159 2200 10600 0 - - - - Received -

3 10600 024 2000 8600 0 6400 81 2 2 No -

1 8600 705 2800 5800 0 - - - 1 No -

44 2 5800 986 3100 2700 0 - - - 0 No 2700

3 9100 962 3100 6000 0 9000 72 1 1 Received -

1 6000 786 2900 3100 0 - - - 0 No 3100

45 2 12100 362 2500 9600 0 - - - - Received -

3 9600 128 2200 7400 0 7600 51 1 1 No -

1 7400 706 2800 4600 0 - - - 0 No 4600

46 2 12200 616 2800 9400 0 - - - - Received -

3 9400 815 2900 6500 0 8500 67 1 1 No -

1 6500 374 2500 4000 0 - - - 0 No 4000

47 2 12500 970 3100 9400 0 - - - - Received -

3 9400 293 2500 6900 0 8100 43 1 1 No -

1 6900 602 2800 4100 0 - - - 0 No 4100

48 2 12200 088 2200 10000 0 - - - - Received -

3 10000 162 2200 7800 0 7200 50 1 1 No -

1 7800 990 3100 4700 0 - - - 0 No 4700

49 2 11900 367 2500 9400 0 - - - - Received -

3 9400 661 2800 6600 0 8400 51 1 1 No -

1 6600 071 2000 4600 0 - - - 0 No 4600

50 2 13000 061 2000 11000 0 - - - - Received -

3 11000 138 2200 8800 0 6200 70 1 1 No -

1 8800 363 2500 6300 0 - - - 0 No 6300

51 2 12500 057 2000 10500 0 - - - - Received -

3 10500 447 2700 7800 0 7200 08 1 1 No -

1 7800 328 2500 5300 0 - - - 0 No 5300

52 2 12500 431 2700 9800 0 - - - - Received -

3 9800 845 3000 6800 0 8200 61 1 1 No -

1 6800 383 2500 4300 0 - - - 0 No 4300

53 2 12500 710 2900 9600 0 - - - - Received -

3 9600 015 2000 7600 0 7400 54 1 1 No -

1 7600 829 3000 4600 0 - - - 0 No 4600

54 2 12000 492 2700 9300 0 - - - - Received -

3 9300 709 2900 6400 0 8600 57 1 1 No -

1 6400 760 2900 3500 0 - - - 0 No 3500

55 2 12100 799 2900 9200 0 - - - - Received -

3 9200 599 2800 6400 0 8600 99 2 2 No -

1 6400 428 2700 3700 0 - - - 1 No -

56 2 3700 377 2500 1200 0 - - - 0 No 1200

3 9800 271 2400 7400 0 7600 24 1 1 Received -

1 7400 092 2200 5200 0 - - - 0 No 5200

57 2 12800 078 2200 10600 0 - - - - Received -

3 10600 010 2000 8600 0 6400 30 1 1 No -

1 8600 875 3000 5600 0 - - - 0 No 5600

58 2 12000 020 2000 10000 0 - - - - Received -

3 10000 649 2800 7200 0 7800 15 1 1 No -

1 7200 725 2900 4300 0 - - - 0 No 4300

59 2 12100 321 2500 9600 0 - - - - Received -

3 9600 039 2000 7600 0 7400 18 1 1 No -

1 7600 866 3000 4600 0 - - - 0 No 4600

60 2 12000 749 2900 9100 0 - - - - Received -

3 9100 354 2500 6600 0 8400 09 1 1 No -

1 6600 297 2500 4100 0 - - - 0 No 4100

61 2 12500 464 2700 9800 0 - - - - Received -

3 9800 658 2800 7000 0 8000 54 1 1 No -

1 7000 827 3000 4000 0 - - - 0 No 4000

62 2 12000 675 2800 9200 0 - - - - Received -

3 9200 388 2500 6700 0 8300 25 1 1 No -

1 6700 844 3000 3700 0 - - - 0 No 3700

63 2 12000 583 2700 9300 0 - - - - Received -

3 9300 166 2200 7100 0 7900 16 1 1 No -

1 7100 129 2200 4900 0 - - - 0 No 4900

64 2 12800 184 2400 10400 0 - - - - Received -

3 10400 493 2700 7700 0 7300 51 1 1 No -

1 7700 840 3000 4700 0 - - - 0 No 4700

65 2 12000 158 2200 9800 0 - - - - Received -

3 9800 894 3000 6800 0 8200 68 1 1 No -

1 6800 496 2700 4100 0 - - - 0 No 4100

66 2 12300 983 3100 9200 0 - - - - Received -

3 9200 258 2400 6800 0 8200 01 1 1 No -

1 6800 805 2900 3900 0 - - - 0 No 3900

67 2 12100 748 2900 9200 0 - - - - Received -

3 9200 622 2800 6400 0 8600 42 1 1 No -

1 6400 155 2200 4200 0 - - - 0 No 4200

68 2 12800 376 2500 10300 0 - - - - Received -

3 10300 966 3100 7200 0 7800 47 1 1 No -

1 7200 513 2700 4500 0 - - - 0 No 4500

69 2 12300 013 2000 10300 0 - - - - Received -

3 10300 594 2800 7500 0 7500 40 1 1 No -

1 7500 122 2200 5300 0 - - - 0 No 5300

70 2 12800 184 2400 10400 0 - - - - Received -

3 10400 516 2700 7700 0 7300 01 1 1 No -

1 7700 441 2700 5000 0 - - - 0 No 5000

71 2 12300 537 2700 9600 0 - - - - Received -

3 9600 589 2800 6800 0 8200 00 2 2 No -

1 6800 640 2800 4000 0 - - - 1 No -

72 2 4000 064 2000 2000 0 - - - 0 No 2000

3 10200 285 2400 7800 0 7200 27 1 1 Received -

Average ending

inventory



Demand=

2624

Average Ending inventory just before the day order received =

3925 Performance of proposed model = 73.83% Average lead time = 1.19

Analysis of the proposed inventory model:

1. We’ve simulated the proposed model for 72 cycles (216 days) to get a steady state

condition.

2. The new model has 3000 units less inventory than the existing model.

3. Average daily demand is 2624 units. (Almost same as the existing model, 2649 units )

4. Average lead time 1.19 days. (Same as the existing model!)

5. Average ending inventory is 6599 units, less than the existing model by (9478-6599)

= 2879 units

6. Average ending inventory in review period is 7128 units, in existing system it’s about

10052 units! (2924 units less than the existing system)


about ((3924 100)/15000) = 26.16 % of the stock level, less than the existing model

by (38.21-26.16) % = 12.05 %!

8. Average ending inventory in the review period is 7128 units it’s about (7128/2624) =

2.71 times of the average demand which is less than the existing model by (3.8-2.71)

= 1.09 times!



manner, = (Total inventory outbound in T+L period/ Inventory level)

= (Current Inventory level - Inventory left in stock just before the day order arrive) /


= ((15000-3924)/15000)

= 73.84% (> than the existing model by 61.79-73.84 = 12.05%)

11. So we’ve reduced about ((3000 )/18000) % = 16.67% inventory than the

existing model.

Advantages of the proposed inventory model:

1. In our proposed inventory model the average ending inventory is less than the existing

inventory model which will reduce inventory holding cost.

2. Comparing with the demand during lead time and considering safety stock, this

prosed model has less average ending inventory than existing inventory model. It will

help to reduce capital wastages.

3. Stock level is reduced about 16.6 % in off season without any shortage condition.

Simulation of existing model (Peak season): The beginning inventory was 16000 bags of cement and 10500 bags of cement order was already placed, the order will






Shortage Quantity

Order Quantity


Generated Lead time


Order received?

Ending inventory just before the day order received

1 16000 779 4700 11300 0 - - - 1 No -

1 2 11300 010 3150 8150 0 - - - 0 No 8150

3 18650 488 4000 14650 0 11850 20 1 1 Received -

1 14650 799 4700 9950 0 - - - 0 No 9950

2 2 21800 621 4250 17550 0 - - - - Received -

3 17550 517 4000 13550 0 12950 63 1 1 No -

1 13550 478 4000 9550 0 - - - 0 No 9550

3 2 22500 875 4800 17700 0 - - - - Received -

3 17700 186 3500 14200 0 12300 73 1 1 No -

1 14200 398 3900 10300 0 - - - 0 No 10300

4 2 22600 574 4250 18350 0 - - - - Received -

3 18350 154 3450 14900 0 11600 46 1 1 No -

1 14900 540 4000 10900 0 - - - 0 No 10900

5 2 22500 126 3450 19050 0 - - - - Received -

3 19050 359 3900 15150 0 11350 06 1 1 No -

1 15150 185 3500 11650 0 - - - 0 No 11650

6 2 23000 350 3900 19100 0 - - - - Received -

3 19100 896 5000 14100 0 12400 92 2 2 No -

1 14100 568 4250 9850 0 - - - 1 No -

7 2 9850 804 4700 5150 0 - - - 0 No 5150

3 17550 537 4000 13550 0 12950 14 1 1 Received -

1 13550 201 3500 10050 0 - - - 0 No 10050

8 2 23000 217 3500 19500 0 - - - - Received -

3 19500 225 3500 16000 0 10500 80 1 1 No -

1 16000 325 3750 12250 0 - - - 0 No 12250

9 2 22750 066 3250 19500 0 - - - - Received -

3 19500 607 4250 15250 0 11250 22 1 1 No -

1 15250 000 5200 10050 0 - - - 0 No 10050

10 2 21300 012 3150 18150 0 - - - - Received -

3 18150 616 4250 13900 0 12600 66 1 1 No -

1 13900 945 5000 8900 0 - - - 0 No 8900

11 2 21500 571 4250 17250 0 - - - - Received -

3 17250 502 4000 13250 0 13250 29 1 1 No -

1 13250 971 5200 8050 0 - - - 0 No 8050

12 2 21300 788 4700 16600 0 - - - - Received -

3 16600 114 3450 13150 0 13350 83 2 2 No -

1 13150 570 4250 8900 0 - - - 1 No -

13 2 8900 213 3500 5400 0 - - - 0 No 5400

3 18750 113 3450 15300 0 11200 85 2 2 Received -

1 15300 335 3750 11550 0 - - - 1 No -

14 2 11550 324 3750 7800 0 - - - 0 No 7800

3 19000 722 4500 14500 0 12000 87 2 2 Received -

1 14500 563 4250 10250 0 - - - 1 No -

15 2 10250 149 3450 6800 0 - - - 0 No 6800

3 18800 099 3250 15550 0 10950 06 1 1 Received -

1 15550 139 3450 12100 0 - - - 0 No 12100

16 2 23050 284 3750 19300 0 - - - - Received -

3 19300 029 3150 16150 0 10350 55 1 1 No -

1 16150 154 3450 12700 0 - - - 0 No 12700

17 2 23050 746 4700 18350 0 - - - - Received -

3 18350 464 4000 14350 0 12150 55 1 1 No -

1 14350 690 4500 9850 0 - - - 0 No 9850

18 2 22000 033 3150 18850 0 - - - - Received -

3 18850 557 4000 14850 0 11650 91 2 2 No -

1 14850 900 5000 9850 0 - - - 1 No -

19 2 9850 945 5000 4850 0 - - - 0 No 4850

3 16500 443 3900 12600 0 13900 01 1 1 Received -

1 12600 628 4250 8350 0 - - - 0 No 8350

20 2 22250 848 4800 17450 0 - - - - Received -

3 17450 714 4500 12950 0 13550 13 1 1 No -

1 12950 672 4500 8450 0 - - - 0 No 8450

21 2 22000 188 3500 18500 0 - - - - Received -

3 18500 434 3900 14600 0 11900 05 1 1 No -

1 14600 208 3500 11100 0 - - - 0 No 11100

22 2 23000 447 3900 19100 0 - - - - Received -

3 19100 546 4000 15100 0 11400 82 2 2 No -

1 15100 397 3900 11200 0 - - - 1 No -

23 2 11200 540 4000 7200 0 - - - 0 No 7200

3 18600 477 4000 14600 0 11900 69 1 1 Received -

1 14600 222 3500 11100 0 - - - 0 No 11100

24 2 23000 308 3750 19250 0 - - - - Received -

3 19250 708 4500 14750 0 11750 47 1 1 No -

1 14750 173 3450 11300 0 - - - 0 No 11300

25 2 23050 910 5000 18050 0 - - - - Received -

3 18050 785 4700 13350 0 13150 29 1 1 No -

1 13350 896 5000 8350 0 - - - 0 No 8350

26 2 21500 094 3250 18250 0 - - - - Received -

3 18250 114 3450 14800 0 11700 19 1 1 No -

1 14800 039 3150 11650 0 - - - 0 No 11650

27 2 23350 800 4700 18650 0 - - - - Received -

3 18650 163 3450 15200 0 11300 92 2 2 No -

1 15200 939 5000 10200 0 - - - 1 No -

28 2 10200 594 4250 5950 0 - - - 0 No 5950

3 17250 838 4800 12450 0 14050 70 1 1 Received -

1 12450 189 3500 8950 0 - - - 0 No 8950

29 2 23000 765 4700 18300 0 - - - - Received -

3 18300 062 3250 15050 0 11450 50 1 1 No -

1 15050 348 3900 11150 0 - - - 0 No 11150

30 2 22600 115 3450 19150 0 - - - - Received -

3 19150 918 5000 14150 0 12350 83 2 2 No -

1 14150 529 4000 10150 0 - - - 1 No -

31 2 10150 823 4800 5350 0 - - - 0 No 5350

3 17700 288 3750 13950 0 12550 70 1 1 Received -

1 13950 077 3250 10700 0 - - - 0 No 10700

32 2 23250 020 3150 20100 0 - - - - Received -

3 20100 723 4500 15600 0 10900 78 1 1 No -

1 15600 686 4500 11100 0 - - - 0 No 11100

33 2 22000 944 5000 17000 0 - - - - Received -

3 17000 197 3500 13500 0 13000 35 1 1 No -

1 13500 818 4700 8800 0 - - - 0 No 8800

34 2 21800 902 5000 16800 0 - - - - Received -

3 16800 401 3900 12900 0 13600 75 1 1 No -

1 12900 685 4500 8400 0 - - - 0 No 8400

35 2 22000 193 3500 18500 0 - - - - Received -

3 18500 940 5000 13500 0 13000 44 1 1 No -

1 13500 233 3500 10000 0 - - - 0 No 10000

36 2 23000 951 5200 17800 0 - - - - Received -

3 17800 109 3450 14350 0 12150 33 1 1 No -

1 14350 115 3450 10900 0 - - - 0 No 10900

37 2 23050 491 4000 19050 0 - - - - Received -

3 19050 175 3450 15600 0 10900 84 2 2 No -

1 15600 947 5000 10600 0 - - - 1 No -

38 2 10600 425 3900 6700 0 - - - 0 No 6700

3 17600 024 3150 14450 0 12050 49 1 1 Received -

1 14450 195 3500 10950 0 - - - 0 No 10950

39 2 23000 829 4800 18200 0 - - - - Received -

3 18200 504 4000 14200 0 12300 18 1 1 No -

1 14200 918 5000 9200 0 - - - 0 No 9200

40 2 21500 642 4250 17250 0 - - - - Received -

3 17250 087 3250 14000 0 12500 49 1 1 No -

1 14000 542 4000 10000 0 - - - 0 No 10000

41 2 22500 018 3150 19350 0 - - - - Received -

3 19350 595 4250 15100 0 11400 79 1 1 No -

1 15100 051 3250 11850 0 - - - 0 No 11850

42 2 23250 133 3450 19800 0 - - - - Received -

3 19800 626 4250 15550 0 10950 42 1 1 No -

1 15550 219 3500 12050 0 - - - 0 No 12050

43 2 23000 665 4500 18500 0 - - - - Received -

3 18500 780 4700 13800 0 12700 47 1 1 No -

1 13800 093 3250 10550 0 - - - 0 No 10550

44 2 23250 269 3750 19500 0 - - - - Received -

3 19500 549 4000 15500 0 11000 78 1 1 No -

1 15500 210 3500 12000 0 - - - 0 No 12000

45 2 23000 647 4250 18750 0 - - - - Received -

3 18750 447 3900 14850 0 11650 17 1 1 No -

1 14850 579 4250 10600 0 - - - 0 No 10600

46 2 22250 436 3900 18350 0 - - - - Received -

3 18350 538 4000 14350 0 12150 30 1 1 No -

1 14350 508 4000 10350 0 - - - 0 No 10350

47 2 22500 807 4700 17800 0 - - - - Received -

3 17800 486 4000 13800 0 12700 34 1 1 No -

1 13800 148 3450 10350 0 - - - 0 No 10350

48 2 23050 754 4700 18350 0 - - - - Received -

3 18350 907 5000 13350 0 13150 50 1 1 No -

1 13350 242 3500 9850 0 - - - 0 No 9850

49 2 23000 121 3450 19550 0 - - - - Received -

3 19550 951 5200 14350 0 12150 88 2 2 No -

1 14350 426 3900 10450 0 - - - 1 No -

50 2 10450 115 3450 7000 0 - - - 0 No 7000

3 19150 029 3150 16000 0 10500 12 1 1 Received -

1 16000 235 3500 12500 0 - - - 0 No 12500

51 2 23000 855 4800 18200 0 - - - - Received -

3 18200 502 4000 14200 0 12300 55 1 1 No -

1 14200 992 5200 9000 0 - - - 0 No 9000

52 2 21300 903 5000 16300 0 - - - - Received -

3 16300 978 5200 11100 0 15400 25 1 1 No -

Average ending

inventory



Demand=

4052

Average lead time = 1.19 Mean demand during (T+L) periods = 16986 Performance of the current model = 64%

Standard deviation of daily demand = 609.85

Standard deviation of demand during (T+L) periods =

1248.68 Average Ending inventory just before the day order received =

9542

Analysis of current model (Peak season):

1. We’ve simulated the current model for 52 cycles (156 days) to get a steady state

condition.

2. Average daily demand is 4052 units.

3. Average lead time 1.19 days.

4. Average ending inventory is 13536 units.

5. Average ending inventory in review period is 14345 units.


about ((9542 100)/26500) = 36.01 % of the stock level and it’s quite high.


= 3.54 times of the average demand which is also quite high!






= ((26500-9542)/26500)

= 64.00%

Problem identification from the existing inventory model:

1. As the average ending inventory is very high with respect to the stock level. For this

reason holding cost is very high which affects profitability.

2. Comparing with the demand during lead time and considering safety stock, average

cycle inventory is also very high which ultimately affects the total inventory cost.

3. As maximum inventory level is very high so that a large amount of space of total

capacity remains unused that affects the total inventory cost.

4. As the performance level is low that’s why a large amount of capital will tied-up and

remain unused. That’s why an optimal policy is required to solve this problem.

Determination of an optimal Inventory level:

For periodic review policy Order up to level point is determined by, OUL= DT+L+SS

Where,

DT+L= Mean demand during T+L period

SS = Safety stock.

As because this model has no backordering system, that’s why the safety stock should be

good enough to support the uncertainty of demand and lead time without stock out risk.

That’s why we’ve assumed the cycle service level very high for meeting any uncertainty of

demand and lead time without the risk of stock out. (This service level adopted by trial &

error method from observing its impact on proposed model)

In this case, we have,

Average daily demand, D = 4052 units

Standard deviation of daily demand, σD = 609.85

Average lead time for replenishment, L = 1.19 days.

Review interval, T = 3 days.

Mean demand during T+L period, DT+L= (3+1.19) 4052 = 16986 units.

Standard deviation of demand during T+L period = √ = √

= 1248.68

SS= NORMSINV (0.99999999) Standard deviation of demand during T+L period

= 5.61 1248.68 = 7005.1 units.

So the Inventory level should be = DT+L + SS = 23991.1 24000 units

Proposed new Inventory level is 24000 units with the same demand pattern and lead

time.

The proposed model’s simulation is shown below,

Simulation of proposed model (Peak season): The beginning inventory is 16000 bags of cement and 8000 bags of cement order was already placed, the order will






Shortage Quantity

Order Quantity


Generated Lead time


Order received?

Ending inventory just before the

day order received

1 16000 730 4500 11500 0 - - - 1 No -

1 2 11500 474 4000 7500 0 - - - 0 No 7500

3 18000 525 4000 14000 0 10000 49 1 1 Received -

1 14000 266 3750 10250 0 - - - 0 No 10250

2 2 20250 086 3250 17000 0 - - - - Received -

3 17000 620 4250 12750 0 11250 96 2 2 No -

1 12750 986 5200 7550 0 - - - 1 No -

3 2 7550 070 3250 4300 0 - - - 0 No 4300

3 15550 267 3750 11800 0 12200 86 2 2 Received -

1 11800 903 5000 6800 0 - - - 1 No -

4 2 6800 526 4000 2800 0 - - - 0 No 2800

3 15000 159 3450 11550 0 12450 64 1 1 Received -

1 11550 886 4800 6750 0 - - - 0 No 6750

5 2 19200 438 3900 15300 0 - - - - Received -

3 15300 869 4800 10500 0 13500 24 1 1 No -

1 10500 860 4800 5700 0 - - - 0 No 5700

6 2 19200 517 4000 15200 0 - - - - Received -

3 15200 862 4800 10400 0 13600 39 1 1 No -

1 10400 328 3750 6650 0 - - - 0 No 6650

7 2 20250 752 4700 15550 0 - - - - Received -

3 15550 215 3500 12050 0 11950 90 2 2 No -

1 12050 749 4700 7350 0 - - - 1 No -

8 2 7350 214 3500 3850 0 - - - 0 No 3850

3 15800 456 4000 11800 0 12200 02 1 1 Received -

1 11800 498 4000 7800 0 - - - 0 No 7800

9 2 20000 662 4500 15500 0 - - - - Received -

3 15500 050 3250 12250 0 11750 27 1 1 No -

1 12250 338 3750 8500 0 - - - 0 No 8500

10 2 20250 380 3900 16350 0 - - - - Received -

3 16350 096 3250 13100 0 10900 62 1 1 No -

1 13100 919 5000 8100 0 - - - 0 No 8100

11 2 19000 249 3500 15500 0 - - - - Received -

3 15500 868 4800 10700 0 13300 73 1 1 No -

1 10700 641 4250 6450 0 - - - 0 No 6450

12 2 19750 402 3900 15850 0 - - - - Received -

3 15850 737 4500 11350 0 12650 89 2 2 No -

1 11350 893 5000 6350 0 - - - 1 No -

13 2 6350 085 3250 3100 0 - - - 0 No 3100

3 15750 025 3150 12600 0 11400 98 2 2 Received -

1 12600 278 3750 8850 0 - - - 1 No -

14 2 8850 395 3900 4950 0 - - - 0 No 4950

3 16350 686 4500 11850 0 12150 81 2 2 Received -

1 11850 275 3750 8100 0 - - - 1 No -

15 2 8100 164 3450 4650 0 - - - 0 No 4650

3 16800 361 3900 12900 0 11100 30 1 1 Received -

1 12900 628 4250 8650 0 - - - 0 No 8650

16 2 19750 720 4500 15250 0 - - - - Received -

3 15250 358 3900 11350 0 12650 23 1 1 No -

1 11350 362 3900 7450 0 - - - 0 No 7450

17 2 20100 408 3900 16200 0 - - - - Received -

3 16200 069 3250 12950 0 11050 07 1 1 No -

1 12950 287 3750 9200 0 - - - 0 No 9200

18 2 20250 867 4800 15450 0 - - - - Received -

3 15450 644 4250 11200 0 12800 61 1 1 No -

1 11200 400 3900 7300 0 - - - 0 No 7300

19 2 20100 292 3750 16350 0 - - - - Received -

3 16350 910 5000 11350 0 12650 48 1 1 No -

1 11350 256 3750 7600 0 - - - 0 No 7600

20 2 20250 099 3250 17000 0 - - - - Received -

3 17000 840 4800 12200 0 11800 23 1 1 No -

1 12200 480 4000 8200 0 - - - 0 No 8200

21 2 20000 572 4250 15750 0 - - - - Received -

3 15750 736 4500 11250 0 12750 89 2 2 No -

1 11250 545 4000 7250 0 - - - 1 No -

22 2 7250 555 4000 3250 0 - - - 0 No 3250

3 16000 209 3500 12500 0 11500 98 2 2 Received -

1 12500 424 3900 8600 0 - - - 1 No -

23 2 8600 185 3500 5100 0 - - - 0 No 5100

3 16600 738 4500 12100 0 11900 92 2 2 Received -

1 12100 686 4500 7600 0 - - - 1 No -

24 2 7600 829 4800 2800 0 - - - 0 No 2800

3 14700 059 3250 11450 0 12550 72 1 1 Received -

1 11450 393 3900 7550 0 - - - 0 No 7550

25 2 20100 117 3450 16650 0 - - - - Received -

3 16650 769 4700 11950 0 12050 24 1 1 No -

1 11950 331 3750 8200 0 - - - 0 No 8200

26 2 20250 269 3750 16500 0 - - - - Received -

3 16500 269 3750 12750 0 11250 91 2 2 No -

1 12750 515 4000 8750 0 - - - 1 No -

27 2 8750 758 4700 4050 0 - - - 0 No 4050

3 15300 522 4000 11300 0 12700 63 1 1 Received -

1 11300 025 3150 8150 0 - - - 0 No 8150

28 2 20850 264 3750 17100 0 - - - - Received -

3 17100 988 5200 11900 0 12100 96 2 2 No -

1 11900 190 3500 8400 0 - - - 1 No -

29 2 8400 465 4000 4400 0 - - - 0 No 4400

3 16500 203 3500 13000 0 11000 20 1 1 Received -

1 13000 935 5000 8000 0 - - - 0 No 8000

30 2 19000 324 3750 15250 0 - - - - Received -

3 15250 969 5200 10050 0 13950 60 1 1 No -

1 10050 270 3750 6300 0 - - - 0 No 6300

31 2 20250 128 3450 16800 0 - - - - Received -

3 16800 933 5000 11800 0 12200 80 1 1 No -

1 11800 340 3750 8050 0 - - - 0 No 8050

32 2 20250 061 3250 17000 0 - - - - Received -

3 17000 553 4000 13000 0 11000 90 2 2 No -

1 13000 980 5200 7800 0 - - - 1 No -

33 2 7800 457 4000 3800 0 - - - 0 No 3800

3 14800 897 5000 9800 0 14200 99 2 2 Received -

1 9800 351 3900 5900 0 - - - 1 No -

34 2 5900 916 5000 900 0 - - - 0 No 900

3 15100 735 4500 10600 0 13400 42 1 1 Received -

1 10600 247 3500 7100 0 - - - 0 No 7100

35 2 20500 091 3250 17250 0 - - - - Received -

3 17250 987 5200 12050 0 11950 25 1 1 No -

1 12050 428 3900 8150 0 - - - 0 No 8150

36 2 20100 254 3500 16600 0 - - - - Received -

3 16600 718 4500 12100 0 11900 28 1 1 No -

1 12100 200 3500 8600 0 - - - 0 No 8600

37 2 20500 768 4700 15800 0 - - - - Received -

3 15800 681 4500 11300 0 12700 84 2 2 No -

1 11300 898 5000 6300 0 - - - 1 No -

38 2 6300 532 4000 2300 0 - - - 0 No 2300

3 15000 059 3250 11750 0 12250 50 1 1 Received -

1 11750 990 5200 6550 0 - - - 0 No 6550

39 2 18800 032 3150 15650 0 - - - - Received -

3 15650 315 3750 11900 0 12100 18 1 1 No -

1 11900 181 3500 8400 0 - - - 0 No 8400

40 2 20500 344 3750 16750 0 - - - - Received -

3 16750 321 3750 13000 0 11000 54 1 1 No -

1 13000 961 5200 7800 0 - - - 0 No 7800

41 2 18800 807 4700 14100 0 - - - - Received -

3 14100 145 3450 10650 0 13350 89 2 2 No -

1 10650 413 3900 6750 0 - - - 1 No -

42 2 6750 295 3750 3000 0 - - - 0 No 3000

3 16350 540 4000 12350 0 11650 12 1 1 Received -

1 12350 393 3900 8450 0 - - - 0 No 8450

43 2 20100 593 4250 15850 0 - - - - Received -

3 15850 178 3500 12350 0 11650 48 1 1 No -

1 12350 835 4800 7550 0 - - - 0 No 7550

44 2 19200 487 4000 15200 0 - - - - Received -

3 15200 420 3900 11300 0 12700 07 1 1 No -

1 11300 248 3500 7800 0 - - - 0 No 7800

45 2 20500 001 3150 17350 0 - - - - Received -

3 17350 912 5000 12350 0 11650 25 1 1 No -

1 12350 750 4700 7650 0 - - - 0 No 7650

46 2 19300 139 3450 15850 0 - - - - Received -

3 15850 150 3450 12400 0 11600 00 2 2 No -

1 12400 726 4500 7900 0 - - - 1 No -

47 2 7900 835 4800 3100 0 - - - 0 No 3100

3 14700 652 4250 10450 0 13550 82 2 2 Received -

1 10450 128 3450 7000 0 - - - 1 No -

48 2 7000 410 3900 3100 0 - - - 0 No 3100

3 16650 079 3250 13400 0 10600 43 1 1 Received -

1 13400 860 4800 8600 0 - - - 0 No 8600

49 2 19200 154 3450 15750 0 - - - - Received -

3 15750 909 5000 10750 0 13250 73 1 1 No -

1 10750 991 5200 5550 0 - - - 0 No 5550

50 2 18800 398 3900 14900 0 - - - - Received -

3 14900 531 4000 10900 0 13100 30 1 1 No -

1 10900 849 4800 6100 0 - - - 0 No 6100

51 2 19200 355 3900 15300 0 - - - - Received -

3 15300 734 4500 10800 0 13200 12 1 1 No -

1 10800 500 4000 6800 0 - - - 0 No 6800

52 2 20000 308 3750 16250 0 - - - - Received -

3 16250 024 3150 13100 0 10900 82 2 2 No -

1 13100 253 3500 9600 0 - - - 1 No -

53 2 9600 315 3750 5850 0 - - - 0 No 5850

3 16750 501 4000 12750 0 11250 50 1 1 Received -

1 12750 615 4250 8500 0 - - - 0 No 8500

54 2 19750 701 4500 15250 0 - - - - Received -

3 15250 487 4000 11250 0 12750 41 1 1 No -

1 11250 717 4500 6750 0 - - - 0 No 6750

55 2 19500 340 3750 15750 0 - - - - Received -

3 15750 969 5200 10550 0 13450 31 1 1 No -

1 10550 581 4250 6300 0 - - - 0 No 6300

56 2 19750 787 4700 15050 0 - - - - Received -

3 15050 625 4250 10800 0 13200 43 1 1 No -

1 10800 690 4500 6300 0 - - - 0 No 6300

57 2 19500 688 4500 15000 0 - - - - Received -

3 15000 288 3750 11250 0 12750 56 1 1 No -

1 11250 997 5200 6050 0 - - - 0 No 6050

58 2 18800 842 4800 14000 0 - - - - Received -

3 14000 502 4000 10000 0 14000 48 1 1 No -

1 10000 730 4500 5500 0 - - - 0 No 5500

59 2 19500 289 3750 15750 0 - - - - Received -

3 15750 394 3900 11850 0 12150 28 1 1 No -

1 11850 028 3150 8700 0 - - - 0 No 8700

60 2 20850 626 4250 16600 0 - - - - Received -

3 16600 730 4500 12100 0 11900 21 1 1 No -

1 12100 202 3500 8600 0 - - - 0 No 8600

61 2 20500 084 3250 17250 0 - - - - Received -

3 17250 414 3900 13350 0 10650 53 1 1 No -

1 13350 270 3750 9600 0 - - - 0 No 9600

62 2 20250 880 4800 15450 0 - - - - Received -

3 15450 128 3450 12000 0 12000 25 1 1 No -

1 12000 222 3500 8500 0 - - - 0 No 8500

63 2 20500 979 5200 15300 0 - - - - Received -

3 15300 105 3450 11850 0 12150 74 1 1 No -

1 11850 236 3500 8350 0 - - - 0 No 8350

64 2 20500 005 3150 17350 0 - - - - Received -

3 17350 428 3900 13450 0 10550 83 2 2 No -

1 13450 909 5000 8450 0 - - - 1 No -

65 2 8450 232 3500 4950 0 - - - 0 No 4950

3 15500 817 4700 10800 0 13200 17 1 1 Received -

1 10800 679 4500 6300 0 - - - 0 No 6300

66 2 19500 501 4000 15500 0 - - - - Received -

3 15500 283 3750 11750 0 12250 04 1 1 No -

1 11750 978 5200 6550 0 - - - 0 No 6550

67 2 18800 644 4250 14550 0 - - - - Received -

3 14550 257 3750 10800 0 13200 19 1 1 No -

1 10800 737 4500 6300 0 - - - 0 No 6300

68 2 19500 130 3450 16050 0 - - - - Received -

3 16050 758 4700 11350 0 12650 21 1 1 No -

1 11350 330 3750 7600 0 - - - 0 No 7600

69 2 20250 338 3750 16500 0 - - - - Received -

3 16500 608 4250 12250 0 11750 52 1 1 No -

1 12250 870 4800 7450 0 - - - 0 No 7450

70 2 19200 410 3900 15300 0 - - - - Received -

3 15300 240 3500 11800 0 12200 85 2 2 No -

1 11800 862 4800 7000 0 - - - 1 No -

71 2 7000 316 3750 3250 0 - - - 0 No 3250

3 15450 693 4500 10950 0 13050 99 2 2 Received -

1 10950 749 4700 6250 0 - - - 1 No -

72 2 6250 213 3500 2750 0 - - - 0 No 2750

3 15800 386 3900 11900 0 12100 82 2 2 Received -

Average ending

inventory



Demand=

4087

Average Ending inventory just before the day order received =

6403 Performance of proposed model =

73.32%

Average lead time = 1.35

Analysis of the proposed inventory model:

1. We’ve simulated the proposed model for 72 cycles (216 days) to get a steady state

condition.

2. The new model has 2500 units less inventory than the existing model.

3. Average daily demand is 4087 units. (Almost same as the existing model, 4052 units )

4. Average lead time 1.35 days. (Greater than the existing model by 1.35-1.19 = 0.16

days)

5. Average ending inventory is 10526 units, less than the existing model by (13536-

10526) = 3010 units

6. Average ending inventory in review period is 11775 units, in existing system it’s

about 14345 units! (2570 units less than the existing system)


about ((6403 100)/24000) = 26.68 % of the stock level, less than the existing model

by (36.01-26.68) % = 9.33 %!


= 2.88 times of the average demand which is less than the existing model by (3.35-

2.88) = 0.47 times!






= ((24000-6403)/24000)

= 73.32% (> than the existing model by 73.32-64.00 = 9.32%)

11. So we’ve reduced about ((2500 )/26500) % = 9.43% inventory than the existing

model.

Advantages of the proposed inventory model:

1. In our proposed inventory model the average ending inventory is less than the existing

inventory model which will reduce inventory holding cost.

2. Comparing with the demand during lead time and considering safety stock, this

prosed model has less average ending inventory than existing inventory model. It will

help to reduce capital wastages.

3. Stock level can be reduced about 9.43 % without any shortage condition.

Conclusion: The strategy that supercrete cement’s dealer is following for their inventory system,

results unnecessary cost which might hamper their overall profitability. As their

inventory stock level is relatively very high than customer demands, so in this case,

our proposed inventory model will help to balance the inventory stock level to satisfy

the customer demand in an optimum way both in off season and peak season.

Simulation of Periodic Review Inventory System in Excel (Improved)

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