Ans 1
The first model has been solved in the following manner:
Step 1: Let the good be transferred from warehouse 1 to 2 be a12 and 1 to 3 be a13 and so on. Thus, there are six independent variables;
Step 2: Set up cost against each transfer to identify the transfer cost
Step 3: Set up the details in the following manner:
| Warehouse | 1 | 2 | 3 |
| Demand | 120 | 90 | 70 |
| Inventory | 90 | 110 | 110 |
| Addition | 30 | 0 | 0 |
| Reduction | 0 | 20 | 10 |
| Net | 120 | 90 | 100 |
| Shortfall | 0 | 0 | 0 |
| Stock out Cost | 10 | 10 | 10 |
Addition records the details of stocks that enter the premise while reduction enters details of stocks that leave the premise
In case net is lower than demand then shortfall is recorded and stock out cost is multiplied to the shortfall to compute the overall stock out cost.
Using the above method the total cost has been computed at 210.
Answer 2
Under the said method, the expected demand and shortfall cost has been computed for each product and then the method as applied under answer 1 has been applied.
| 1 | 2 | 3 | ||||
| Probability | 1 | 2 | 3 | Stock out cost | Stock out cost | Stock out cost |
| 0.07 | 100 | 70 | 50 | 100 | 0 | 0 |
| 0.24 | 110 | 80 | 60 | 200 | 0 | 0 |
| 0.38 | 120 | 90 | 70 | 300 | 0 | 0 |
| 0.24 | 130 | 100 | 80 | 400 | 0 | 0 |
| 0.07 | 140 | 110 | 90 | 500 | 0 | 0 |
| Expected Value | 120 | 90 | 70 | 300 | 0 | 0 |
Answer 3
In this mode, the mean demand and standard deviation has been considered. Further, norm inv formula and rand formula has been applied to determine 5000 simulations. Using the said model, the average stock out cost 301. The 95th percentile is 140.
