CWD Electronics sells Televisions (TV), which it orders from the USA. Because of shipping and handling costs, each order must be for 5TVs. Because of the time it takes to receive an order, the company places an order every time the present stock drops to 5 TVs. It costs $50 to place an order. It costs the company $500 in lost sales when a customer asks for a TV and the warehouse is out of stock. It costs $100 to keep each TV stored in the warehouse. If a customer cannot purchase a TV when it is requested, the customer wi
CWD Electronics sells Televisions (TV), which it orders from the USA. Because of shipping and handling costs, each order must be for 5TVs. Because of the time it takes to receive an order, the company places an order every time the present stock drops to 5 TVs. It costs $50 to place an
order. It costs the company $500 in lost sales when a customer asks for a TV and the warehouse is out of stock. It costs $100 to keep each TV stored in the warehouse. If a customer cannot purchase a TV when it is requested, the customer will not wait until one comes in but will go to a competitor.
The following probability distribution for demand for TV has been and the time required to receive an order once it is placed (lead time) has the following probability distribution: (Attached)
The company has 3 TVs in stock. Orders are always received at the beginning of the week.
Note that a lead time of 2 weeks imply that an order placed in week one will arrive in week 4.
The time required to receive an order once it is placed (lead time) has the following probability
distribution:
Time to Receive an Order (wk) Probability
1 .60
2 .20
3 .20
Hint. No order is placed until the current order has arrived. Usage of all random numbers for lead time depend on stock arrivals in the model hence all numbers may not be used.
a) Construct the appropriate random number mappings for the random variables starting with .00. (lead & demand time)
b) Simulate CWD's ordering and sales policy for 20 weeks.
c) Compute the average cost of the policy
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