Inventory Simulation

3 (2001), pp.175-188.",,,, ,,,,, ,"This workbook contains a macro, written in Visual Basic, that allows you to simulate the inventory control",,,,, ,"system known variously as the Min-Max system, the (s,S) system, or the reorder-level, order-up-to system.",,,,, ,Two versions are available in the simulation:,,,,, , ,"Periodic review: orders may be placed only at specific points of time, such as daily or weekly.",,,, , ,"Continuous review: orders are placed instantly, as soon as inventory reaches the reorder level.",,,, ,"In both cases, the state of the system is tracked at all times, so that accurate costs may be calculated.",,,,, ,,,,, ,"The word ""order"" refers to an action taken to replenish the supply of an item that is stocked in inventory",,,,, ,"and sold to customers.. This is necessary to avoid negative values.,,,, ,"From Shortfall, we may compute more performance measures:",,,, ,21,NetInv = S - Shortfall.,,,, ,22,"Inv = MAX(0, S - Shortfall)",,,, ,23,"BO = MAX(0, Shortfall - S) = Inv - S + Shortfall",,,, ,24,P(BO 0) = P( Shortfall S),,,, ,"Since a demand is backordered if it arrives when inventory is zero, the average number of demands",,,, ,backordered per unit time is,,,, ,25,Rate(BO) = P( Shortfall S) (Demand Rate),,,, ,"We can also calculate the average time that a backorder endures which, according to Little s Law,",,,, ,is proportional to the average number of backorders waiting.,,,, ,,Average duration of a Backorder = (Average Backordered) (Rate of Backorders Occuring),,,, ,26,Av(Wait per BO) = Av(BO) Av(DemandRate) P Shortfall S) ,,,, ,"If you want to include in this average the fact that many customers have zero backorder time, then",,,, ,27,Av(Wait per Demand) = Av(BO) Av(DemandRate) (includes zero-length backorders.),,,, ,,,,, ,(b) Average Inventory and Shortages,,,,, ,Average inventory is greater when computed over time than whe