Inventory Policy 2 |
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| What
is the best ordering policy for a warehouse to minimize cost, while meeting
demands? |
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warehouse has a limited storage capacity of 50000 cubic meters (m3) and a
budget of $30,000. |
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Holding
Cost |
Storage Space per unit (m3) |
Demand per month |
Ordering cost per order |
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Price per unit |
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| Product 1 |
$25 |
440 |
200 |
$50 |
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$200 |
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| Product 2 |
$20 |
850 |
325 |
$50 |
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$300 |
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| Product 3 |
$30 |
1260 |
400 |
$50 |
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$275 |
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| Product 4 |
$15 |
950 |
150 |
$50 |
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$400 |
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| Storage Capacity |
50000 |
Budget |
$30,000 |
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| Quantity to order each month |
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Cost of holding |
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Space |
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EOQ |
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and ordering |
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used (m3) |
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| Product 1 |
25 |
28.28427 |
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$713 |
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5500 |
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| Product 2 |
25 |
40.31129 |
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$900 |
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10625 |
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| Product 3 |
25 |
36.51484 |
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$1,175 |
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15750 |
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| Product 4 |
25 |
31.62278 |
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$488 |
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11875 |
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| Cost
of products |
$29,375 |
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Total |
$3,275 |
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43750 |
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| Problem |
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| This
model continues to build on the first inventory policy model. We expand the
model by giving the warehouse a |
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for buying new products. In other words: A warehouse sells 4 products with a different demand for each |
| product.
Each product has a different holding cost and requires a certain amount of
space. What should the ordering |
| policy for the
warehouse be, given its limited storage capacity and limited budget? |
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| Solution |
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| The
variables are exactly the same as in the first model. So is the objective,
and the way it is calculated. The |
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us within the budget. This new constraint is expressed as: |
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Cost_of_products <= Available_money and we also have |
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Space_used <= Available_space as before |
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| We still have Quantities >= 0 via the Assume
Non-Negative option. This time, we
also require integer quantities: |
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Quantities = integer |
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| Remarks |
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| Once
again, we have calculated the EOQs as discussed in the first inventory policy
model. If we would give a |
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budget and unlimited storage space, the Solver would find exactly those
values. |
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is one more change we made in this model compared to the one on worksheet
Invent1. This time we |
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the variables to be integers. Whether this is a valid assumption would depend
completely on the type of |
| product
that is dealt with. If a model is trying to determine how many cars,
airplanes or other such articles to buy, it |
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be very important to use integer variables. If the model, on the other hand,
is giving an indication how much |
| sugar to buy,
for example, it would not be appropriate to use integer variables. |
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