Question 3 Simulation (15 marks)

Six months ago, Picasso Paints rented an additional shop in the main street of Wodonga to sell paint specifically to DIY customers, whilst trader customer purchase out of the manufacturing plant. Picasso Paints has been unable to adequately hold inventory to satisfy the customer demand. Anna Sasin, who is the store manager has come up with the following probability distribution demand to try and understand customer behaviour and therefore be able to order enough paint.

Demand per week	Probability		Lead time (days)	Probability
0	0.05		1	0.50
10	0.20		2	0.45
20	0.40		3	0.05
30	0.20
40	0.15

The shop does not have adequate storage to keep a plentiful supply and rents additional space at the back of the shop at a cost of $1 per tin. The stock out cost is $40 per tin. Anna Sasin usually places and order when stock is down to 20 tins.

Required:

1. Current there are 10 tins in inventory. Simulate a 20 weeks scenario for Anna Sasin. Calculate the weekly stock out and holding cost. (10 marks)
2. In a separate table repeat the simulation assuming the reorder point is 10 tins. (2 marks) Discuss the results (3 marks)