19. A company has been having problems with stockouts for one of its components and is contemplating making alterations either to the reorder quantity or to the reorder level, or to both.

Before making any decision, the company wishes to explore whether any guidance can be obtained by simulating the operation of the system.

The pattern of weekly demand over the past few years has been as follows:

Ordering costs are Rs 20 per order and the carrying cost is Rs 5 per unit. The estimated loss when an order cannot be met is Rs 12 per unit. When stock reaches the pre-set order point, a replenishment order is issued.

(a) You are required to describe, using a flow chart or other means, how a simulation model for this problem might work.
Using a re-order point of2,500 and an order quantity of 2,000, a simulation of20 weeks' operations has been run on a computer and the following summary produced:

(b) You are required to interpret the above summary and suggest what could be done next to make the simulation more realistic.

Transcribed Image Text:

Weekly demand (Units) Frequency 500 10 525 15 550 30 575 50 600 55 625 60 650 40 675 20 700 10 725 5