MODEL:
! Newsboy inventory model;
! This model calculates the optimal stock levels
for a product with normally distributed demand
and a fixed ordering cost;
DATA:
P = 11; ! Penalty/unit for not having enough;
H = 5; ! Cost/unit for excess;
MU = 144; ! Mean demand;
SIGMA = 25; ! Standard deviation in demand;
K = 15; ! Fixed cost of placing an order;
ENDDATA
! Compute reorder point, SLIL, and order up to
point, SBIG;
! Calculate the order up to point, SBIG, using
standard newsboy formula;
@PSN( ZBIG ) = P /( P + H);
ZBIG = ( SBIG - MU)/ SIGMA;
! and the expected cost of being there, CSBIG;
CSBIG = SIGMA * @PSL( ZBIG) * ( P + H) + H *
( SBIG - MU);
! The expected cost at the reorder point should
differ from the expected cost at SBIG by the
fixed order cost, K;
CSLIL = K + CSBIG;
! Solve for SLIL;
CSLIL = SIGMA * @PSL( ZLIL) * ( P + H) * H *
( ZLIL * SIGMA);
ZLIL = ( SLIL - MU)/ SIGMA;
END
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