OBJECTIVE:

• To Observe and collect data from the existing inventory system

• Finding the problem into the existing system
• To simulate an existing system for improvement purpose

Introduction:

The purpose of simulation is to give students the chance to apply theories and techniques learned
in the classroom. In business oriented simulations, especially those involving quantitative
techniques, it is often difficult to isolate the decision making process from the mechanics of the
simulation. This is particularly true with inventory simulations because of the amount of
bookkeeping required for inventory management. The Inventory Management Simulation (IMS),
a computer based simulation, is designed to alleviate this problem. It acts both as customer and
bookkeeper for the student. It generates demands, and maintains all the necessary records. The
student is then free to focus on individual decisions and the decision making process. The
interactive nature of the software makes the use of the simulation relatively unstructured, so the
student can control the time and frequency of its use. The flexibility of the software allows the
instructor to adapt it to a wide variety of learning situations.

Guidelines of Inventory Management Simulation

There are two decision variables: order quantity and reorder point and two probabilistic
components: daily demand and reorder lead time. The main purpose of simulation runs is to try
out various schemes of order quantities and reorder point and to find (to minimize) the smallest
total inventory cost. That means that inventory cost includes ordering cost, holding cost and
stockout costs.
The elements of model are as follows:
- Daily demands for items, collected from observation of past days. That historical frequency
will be converted into a probability distribution and cumulative distribution for the variable daily
demand
- Lead time (in days), collected from observations of past orders. That historical frequency will
be converted into a probability distribution and cumulative distribution for the variable lead time.
Methodology of current system analysis

Step1: At first we find out the demand of the product of the industry by their previous data book.

Step 2: Then we analyze the data and find out the probability of the demand for per day.

Step 3: Then we find out the lead times for orders and find out the probabilities for each lead
time.

Step 4: In this step we have to find out the lead time demand for this we calculate the cumulative
probabilities and set a range of random number for each demand. We also calculate the
cumulative probabilities of lead tine and also set a range of random number for each lead time in
this stage we should remember that the range for random number must not be same for lead tome
and demand.

Step 5: In this step we do the final calculation to know what is the lead time demand of the
existing system we took a random number from the lead time chart and then we took random
number s from the demand chart against the number of lead time then we took cumulative
number of demand for this lead time by repeating this process we calculate the lead time demand
for the whole data.

Step 6: after that we set the lead time demand against the perspective days in Bar chart and find
out the maximum level of inventory. We also can find the EOQ for the inventory from this
chart.
Collected data and collaboration:
Cycle Random digit for Lead Random digit Demand Lead
lead time Time for Demand time
Demand

1 308 3 29 1 1
2 175 3 90 4 4
3 572 3 17 0 0
4 675 4 62 1 2
50 1
5 807 4 65 1 3
66 2
6 628 4 13 0 1
29 1
7 952 4 47 1 2
43 1
8 988 5 52 1 3
70 2
8 0
9 495 3 97 4 4
10 210 3 73 2 3
11 290 3 30 1 1
12 680 4 96 4 4
16 0
13 812 4 56 1 2
57 1
14 314 3 56 1 1
15 805 4 6 0 5
98 5
16 651 3 39 1 1
17 860 4 82 3 2
56 1
18 553 3 81 3 3
19 353 3 7 0 0
20 961 5 88 3 6
38 1
66 2
21 829 4 63 1 1
84 3
22 373 3 12 0 0
23 260 3 97 4 4
24 715 4 93 4 5
61 1
Showing frequency of lead time demand in histogram:

Frequency
10

5
Frequency
4

0
0-1.0 2.0-3.0 4.0-6.0

Figure: Lead Time Demand vs Frequency

REVIEW OF CURRENT SITUATION:

 The furniture sales house does not follow any fixed policy, neither Fixed Order Quantity
policy nor Periodic Review policy.
 Their lead time is 7 day.
 They don’t order following any policy.
 They keep 450-500 CFT wood and ply-wood in their warehouse.
 They make their order on the basis of demand.
 They keep their safety stock for in case of emergency sell.
 They don’t face any stock out.
 There is a scope of reducing transportation cost, thus total cost by changing their
inventory model.
 COURSE NO: IPE-416
25TH APRIL, 2013

Report on
SIMULATION OF INVENTORY SYSTEM OF A
FURNITURE MANUFACTURING COMPANY

Submitted by: Group 04

Tanvir Ahmed Sharkar 2009334034

Shah Moazzem Hossain 2009334036
Abdullah Al Razi 2009334037
Tanjina Akhter 2009334038
Rukhsana Akhter 2009334039
Ahsanul Haque 2009334040
Rashedul Islam 2009334041
Saklain Mostak 2009334042

Department of Industrial and Production Engineering.

ShahJalal University of Science and Technology, Sylhet.