Mission IMpossible.....unless sby can do it
Your mission:
Develop an application that will determine the total relevant cost (TRC) for an inventory system. To assist in understanding how the inventory system works, the context of a small home (dorm) –run business is used. The information that the user supplies is emphasized with italics.
The Situation (and information required):
You have decided to start and run a (probably illegal) T-shirt business out of your dorm room selling cheesy knockoff Hokie Bird shirts. You have decided in advance that the time frame is 10 weeks, which is how many time periods (weeks) your business will operate, after which you will disappear to avoid the Virginia Tech licensing police. You will start with an initial inventory (possibly zero) of shirts to sell. You get the shirts from a local supplier, and every time you place a replenishment order for more shirts with the supplier you incur a fixed ordering cost. An order you place arrives at your business right away (ie the lead time is 0). In your room, the shirts must be stored somewhere, so you have agreed to rent closet space from your roommate to store your inventory. You pay your roommate a fixed holding cost per unit per time period (ie you pay them every week an amount based on the number of shirts you stored in their closet that week).
If the demand during any week exceeds the inventory on-hand then the "overflow" customers are considered unfilled demand (lost sales). We will assume, for the sake of simplicity, that the shortage cost is 0 (ie no cost for lost sales). We assume no back-ordering, so on-hand inventory cannot fall below 0. If, at the end of the time frame, you have left-over T-shirts (an inventory level greater than 0) then a disposal cost is incurred per unit (for each T-shirt).
The demand stream is the customer demand for each period in the time frame and is specified in advance. Think of this as a set of estimated, or forecasted, demand values that we will use to evaluate the inventory system.
Replenish orders are placed, when needed, according to an inventory policy. Our inventory system may use either an "order point order up-to" (s, S) policy or an "order point order quantity" (s, Q) policy. An (s, S) policy means that whenever the inventory level falls below the order point (s) an order is placed that is large enough to raise the inventory level to the order-up-to point (S). The (s, Q) policy is similar except that orders are always the same size (Q units).
We are interested in two performance measures, total relevant cost and fill rate, defined as:
1) TRC = ordering costs + holding costs + disposal costs
2) Fill Rate = demand filled / total demand
Basic Operation:
The starting inventory level for any period is the ending inventory of the previous period plus the amount ordered at the end of the previous period (assuming lead time is 0). An incoming order, if there is one (ie an order placed at the end of the prior period arriving at the start of the current period), is immediately added to the on-hand inventory level. Next, demand for the current period is serviced from the on-hand inventory and the on-hand inventory level is appropriately adjusted. Shortages, if any, are totaled so we can calculate the fill rate at the end of the time frame. We assume that the actions just described take no time. The holding costs for the current period are calculated based on the inventory level after servicing demands. The current inventory level is compared to the order point of the inventory policy and a replenishment order is placed if necessary. with the appropriate ordering cost accounted for. This process repeats for each period in the time frame. Upon completing the operation of the final period in the time frame, the disposal costs are calculated, if necessary.
Assignment:
Create an inventory decision support application. The application will gather the business information and demand stream and allow the user to define either an (s, S) or an (s, Q) inventory policy. The application will then calculate and display the two performance measures for the business during the time frame. The user should be able to easily change the business, demand, or inventory policy information and recalculate the performance measures. The idea is to provide a tool that one could use to compare different situations and policies.
Assumptions:
To simplify things you may assume that the time frame will always be 10 periods, and the lead time will always be 0. We also assume that the shortage cost is 0. One possible “extension “ would be to create a program that allows the user to specify any time frame or lead time (an integer number of periods >= 0) or one that allows a shortage cost to be defined
Good luck
