School of Industrial Engineering & Management (IEM) Inventory Management

International University, VNU-HCM Instructor: Dr. Nguyen Van Hop

VÕ NGỌC KIM CHÂU- IELSIU18187 (SATURDAY AFTERNOON CLASS)

HOMEWORK 3
=========================================================
Problem 1: problem 6.2 page 224 Silver et.al. (1998) book
Problem 2: problem 6.10 page 226 Silver et.al. (1998) book
Problem3: solve problem 6.17 page 189 Silver et.al. (1998) book by dynamic programming
approach
=========================================================
PROBLEM 1:

t Dt ct ($) At Ht ($)
($)
1 18 4.75 35 0.24
2 31 4.75 35 0.24
3 23 4.75 35 0.24
4 95 4.75 35 0.24
5 29 4.75 35 0.24
6 37 4.75 35 0.24
7 50 4.75 35 0.24
8 39 4.75 35 0.24
9 30 4.75 35 0.24
10 88 4.75 35 0.24
11 22 4.75 35 0.24
12 36 4.75 35 0.24

35+18∗4.75
Z1,1= =120.5
1
35+ ( 18+31 )∗4.75+0.24∗31
Z1,2= =137.595
2
-We have Z1,2>Z1,1 => The heuristic sets Q1 = 18. Next,
35+31∗4.75
Z2,2= =182.25
1
School of Industrial Engineering & Management (IEM) Inventory Management
International University, VNU-HCM Instructor: Dr. Nguyen Van Hop

35+ ( 31+23 )∗4.75+0.24∗23

Z2,3= =148.51<182.25
2
35+ ( 31+23+95 )∗4.75+ 0.24∗ ( 23+95 ) +0.24∗95
Z2,4= =266.2067>148.51
3
-We have Z2,4>Z2,3 => The heuristic sets Q2 = 31+23= 54. Next,
35+95∗4.75
Z4,4= =486.25
1
35+ ( 95+29 )∗4.75+ 0.24∗29
Z4,5= =315.48<486.25
2
35+ ( 95+29+37 )∗4.75+0.24∗( 29+37 ) +0.24∗37
Z4,6= =274.823<315.48
3
Z4,7=
35+ ( 95+29+37+ 50 )∗4.75+0.24∗( 29+37+50 )+ 0.24∗( 37+50 ) +0.24∗50
=274.4925< 274.823
4
Z4,8=
35+ ( 95+29+37+ 50+39 )∗4.75+0.24∗( 29+37+ 50+39 ) +0.24∗( 37+50+39 )+ 0.24∗( 50+39 ) +0.24∗39
5
=264.132
<274.4925
Z4,9=
35+ ( 95+29+37+ 50+39+30 )∗4.75+0.24∗( 29+37 +50+39+30 ) +0.24∗( 37+ 50+39+30 ) +0.24∗( 50+39+30 )+ 0.2
6
=249.86<264.132
Z4,10=
35+ ( 95+29+37+ 50+39+30+88 )∗4.75+ 0.24∗( 29+37+50+39+30+ 88 ) +0.24∗( 37+50+39+ 30+88 ) +0.24∗( 50
+ 0.24∗( 39+ 30+88 ) +0.24∗( 30+ 88 ) +0.24∗88
¿
7
= 291.98>249.86
-We have Z4,10>Z4,9 => The heuristic sets Q4 = 95+29+37+50+39+30= 280. Next,
35+88∗4.75
Z10,10= =453
1
School of Industrial Engineering & Management (IEM) Inventory Management
International University, VNU-HCM Instructor: Dr. Nguyen Van Hop

35+ ( 88+22 )∗4.75+0.24∗22

Z10,11= =281.39<453
2
35+ ( 88+22+36 )∗4.75+ 0.24∗( 22+ 36 ) +0.24∗36
Z10,12= =¿250.353<281.39
3
-Since we have reached the end of the planning horizon, the heuristic sets Q10 = 88+22+36= 146.
*We have the following table:
t 1 2 3 4 5 6 7 8 9 10 11 1 Total
2
Dt 18 31 23 95 29 37 50 39 30 88 22 36
Qt 18 54 0 250 0 0 0 0 0 146 0 0
It 0 23 0 185 156 119 69 30 0 58 36 0
Setup 35 35 0 35 0 0 0 0 0 35 0 0 140
Cost
Holdin 0 5.52 0 44.4 37.44 28.5 16.56 7.2 0 13.9 8.64 0 162.24
g Cost 6 2
Total 35 40.52 0 79.4 37.44 28.5 16.56 7.2 0 48.9 8.64 0 302.24
Cost 6 2

PROBLEM 2:
A= $25
r= $0.05
v= $4
 H= r*v=0.05*0.4= $0.2
Month Sequential Number Requirement (units)
January 1 20
February 2 40
March 3 110
April 4 120
May 5 60
June 6 30
July 7 20
August 8 30
September 9 80
October 10 120
School of Industrial Engineering & Management (IEM) Inventory Management
International University, VNU-HCM Instructor: Dr. Nguyen Van Hop

November 11 130
December 12 40
Total 800

a/ Fixed Economic Order Quantity Method:

2 AD 2∗25∗800
Assume FOQ= EOQ=
√ H
=
√ 0.2
=447, assume 400.

*We have the following table:

t 1 2 3 4 5 6 7 8 9 10 11 12 Total
Starting 0 380 340 230 110 70 40 20 390 310 190 60
It
Qt 400 0 0 0 0 0 0 400 0 0 0 0 800
Dt 20 40 110 120 60 30 20 30 80 120 130 40 800
Ending 380 340 230 110 70 40 20 390 310 190 60 20 2160
It

Total replenishment costs: 2*$25= $50

Total carrying costs: 2160*$0.2= $432
Total replenishment + carrying costs: $482

b/ Wagner-Whitin Algorithm:
t=1
Z1=A=25
 j1=1;
Z2=min{Z1+0.2*40, Z1+25}
=min{33, 50}
= 33
 j2=1;
 Q1=20+40=60
Z3=min{Z1+0.2*(40+110)+0.2*110, Z1+25+0.2*110, Z2+25}
=min{77, 72, 58}
School of Industrial Engineering & Management (IEM) Inventory Management
International University, VNU-HCM Instructor: Dr. Nguyen Van Hop

= 58
 j3=3
t=3
Z4=min{Z2+25+0.2*120, Z3+25}
=min{82, 83}
= 82
 j4=3
 Q3=110+120=230
Z5=min{Z2+25+0.2*(120+60)+0.2*60, Z3+25+0.2*60, Z4+25}
=min{106, 95, 107}
= 95
 j5=4
And so on.
*We have the following table:
t 1 2 3 4 5 6 7 8 9 10 11 12 Total
Starting 0 40 0 120 110 50 20 0 0 0 0 0
It
Qt 60 0 230 110 0 0 0 30 80 120 130 40 800
Dt 20 40 110 120 60 30 20 30 80 120 130 40 800
Ending 38 0 120 110 50 20 0 0 0 0 0 0 338
It

Total replenishment costs: 8*$25= $200

Total carrying costs: 338*$0.2= $67.6
Total replenishment + carrying costs: $267.6

b/ Silver- Meal Heuristic:

Assume that the cost of each unit equals to $1.
25+20
Z1,1= =45
1
School of Industrial Engineering & Management (IEM) Inventory Management
International University, VNU-HCM Instructor: Dr. Nguyen Van Hop

25+ ( 20+40 )∗1+0.2∗40

Z1,2= =46.5>45
2
-We have Z1,2>Z1,1 => The heuristic sets Q1 = 20. Next,
25+40
Z2,2= =65
1
25+ ( 40+110 )∗1+ 0.2∗110
Z2,3= =98.5>65
2
-We have Z2,3>Z2,2 => The heuristic sets Q2 = 40. Next,
25+110
Z3,3= =135
1
25+ ( 110+120 )∗1+0.2∗120
Z3,4= =139.5> 135
2
-We have Z3,4>Z3,3 => The heuristic sets Q3 = 110. Next,
25+120
Z4,4= =145
1
25+ ( 120+60 )∗1+ 0.2∗60
Z4,5= =108.5< 145
2
25+ ( 120+60+30 )∗1+0.2∗( 60+ 30 ) +0.2∗30
Z4,6= =86.33<108.5
3
25+ ( 120+60+30+20 )∗1+0.2∗( 60+30+20 ) +0.2∗( 30+20 ) +0.2∗20
Z4,7= =72.75<86.33
4
Z4,8=
25+ ( 120+60+30+20+ 30 )∗1+0.2∗( 60+30+20+30 )+ 0.2∗( 30+20+30 )+ 0.2∗( 20+30 )+ 0.2∗30
=69< 72.25
5
Z4,9=
25+ ( 120+60+30+20+ 30+80 )∗1+ 0.2∗( 60+30+ 20+ 30+80 ) +0.2∗( 30+20+30+80 )+ 0.2∗( 20+30+ 80 ) +0.2∗(30
6
-We have Z4,9>Z4,8 => The heuristic sets Q4 = 120+60+30+20+30=260. Next,
25+80
Z9,9= =105
1
School of Industrial Engineering & Management (IEM) Inventory Management
International University, VNU-HCM Instructor: Dr. Nguyen Van Hop

25+ ( 80+120 )∗1+ 0.2∗120

Z9,10= =124.5>105
2
-We have Z9,10>Z9,9 => The heuristic sets Q9 = 80. Next,
25+120
Z10,10= =145
1
25+ ( 120+130 )∗1+ 0.2∗130
Z10,11= =150.5>145
2
-We have Z10,11>Z10,10 => The heuristic sets Q10 = 120. Next,
25+130
Z11,11= =155
1
25+ ( 130+40 )∗1+0.2∗40
Z11,12= =101.5<155
2
-Since we have reached the end of the planning horizon, the heuristic sets Q11 = 130+40= 170.
*We have the following table:
t 1 2 3 4 5 6 7 8 9 10 11 12 Total
Starting 0 0 0 0 140 80 50 30 0 0 0 40
It
Qt 20 40 110 260 0 0 0 0 80 120 170 0 800
Dt 20 40 110 120 60 30 20 30 80 120 130 40 800
Ending 0 0 0 140 80 50 30 0 0 0 40 0 340
It

Total replenishment costs: 7*$25= $175

Total carrying costs: 340*$0.2= $68
Total replenishment + carrying costs: $243

c/ Least Unit Cost Method:

Assume that the cost of each unit equals to $1.
25+20
Z1,1= =2.25
20
25+ ( 20+40 )∗1+0.2∗40
Z1,2= =1.55<2.25
20+40
School of Industrial Engineering & Management (IEM) Inventory Management
International University, VNU-HCM Instructor: Dr. Nguyen Van Hop

25+ ( 20+40+ 110 )∗1+ 0.2∗( 40+110 ) +0.2∗110

Z1,3= =¿1.453<1.55
20+ 40+110
25+ ( 20+40+ 110+120 )∗1+ 0.2∗( 40+110+120 )+ 0.2∗( 110+ 120 )+ 0.2∗120
Z1,4= =¿1.514>1.453
20+ 40+110+ 120
-We have Z1,4>Z1,3 => The heuristic sets Q1 = 20+40+110= 170. Next,
25+120
Z4,4= =1.208
120
25+ ( 120+60 )∗1+ 0.2∗60
Z4,5= =1.205< 1.208
120+ 60
25+ ( 120+60+30 )∗1+0.2∗( 60+ 30 ) +0.2∗30
Z4,6= =1.233> 1.205
120+60+30
-We have Z4,6>Z4,5 => The heuristic sets Q4 = 120+60= 180. Next,
25+30
Z6,6= =1.833
30
25+ ( 30+20 )∗1+ 0.2∗20
Z6,7= =¿1.58<1.833
30+ 20
25+ ( 30+20+30 )∗1+0.2∗( 20+ 30 ) +0.2∗30
Z6,8= =1.5125< 1.58
30+20+30
25+ ( 30+20+30+ 80 )∗1+0.2∗( 20+30+80 )+ 0.2∗( 30+80 )+ 0.2∗80
Z6,9= =¿1.556>1.5125
30+20+30+ 80
-We have Z6,9>Z6,8 => The heuristic sets Q6 = 30+20+30= 80. Next,
25+80
Z9,9= =1.3125
80
25+ ( 80+120 )∗1+ 0.2∗120
Z9,10= =1.245<1.3125
80+ 120
25+ ( 80+120+130 )∗1+0.2∗( 120+130 )+ 0.2∗130
Z9,11= =1.306>1.245
80+120+130
-We have Z9,11>Z9,10 => The heuristic sets Q9 =80+120= 200. Next,
25+130
Z11,11= =1.192
130
School of Industrial Engineering & Management (IEM) Inventory Management
International University, VNU-HCM Instructor: Dr. Nguyen Van Hop

25+ ( 130+40 )∗1+0.2∗40

Z11,12= =1.194> 1.192
130+ 40
-We have Z11,12>Z11,11 => The heuristic sets Q11 = 130.
-Since we have reached the end of the planning horizon, the heuristic sets Q12 = 40.
*We have the following table:
t 1 2 3 4 5 6 7 8 9 10 11 12 Total
Starting 0 150 110 0 60 0 50 30 0 120 0 0
It
Qt 170 0 0 180 0 80 0 0 200 0 130 40 800
Dt 20 40 110 120 60 30 20 30 80 120 130 40 800
Ending 150 110 0 60 0 50 30 0 120 0 0 0 520
It

Total replenishment costs: 6*$25= $150

Total carrying costs: 520*$0.2= $104
Total replenishment + carrying costs: $254
d/ Part-Period Balancing Method:
t=1: A1=25;
H1=0; H2= 0.2*40=8; H3= 0.2*(40+110)+0.2*110= 52
We can see that H2=$8 is closer to A1=$25 than is H3=$52
 Q1=20+40=60
t=3: A3=25;
H3=0; H4=0.2*120=24; H5=0.2*(120+60)+0.2*60=48
We can see that H4=$24 is closer to A3=$25 than is H5=$52
 Q3=110+120=230
t=5: A5=25;
H5=0; H6=0.2*30=6; H7=0.2*(30+20)+0.2*20=14;
H8=0.2*(30+20+30)+0.2*(20+30)+0.2*30= 32
We can see that H8=$32 is closer to A5=$25 than is H7=$14
 Q5= 60+30+20+30= 140
School of Industrial Engineering & Management (IEM) Inventory Management
International University, VNU-HCM Instructor: Dr. Nguyen Van Hop

t=9: A9=25;
H9=0; H10=0.2*120=24; H11=0.2*(120+130)+0.2*130=76
We can see that H10=$24 is closer to A9=$25 than is H11=$76
 Q9=80+120=200
t=11: A11=25;
H11=0; H12=0.2*40=8
-Since we have reached the end of the planning horizon, the heuristic sets Q11 = 130+40= 170.
*We have the following table:
t 1 2 3 4 5 6 7 8 9 10 11 12 Total
Starting 0 40 0 120 0 80 50 30 0 120 0 40
It
Qt 60 0 230 0 140 0 0 0 200 0 170 0 800
Dt 20 40 110 120 60 30 20 30 80 120 130 40 800
Ending 40 0 120 0 80 50 30 0 120 0 40 0 480
It

Total replenishment costs: 5*$25= $125

Total carrying costs: 480*$0.2= $96
Total replenishment + carrying costs: $221

f/ Periodic Order Quantity method:

2 AD 2∗25∗800
EOQ=
√ H
=
√ 0.2
=447.214

EOQ 447.214
POQ= = =6
D́ 66.67
*We have the following table:
t 1 2 3 4 5 6 7 8 9 10 11 12 Total
Starting 0 360 320 210 90 30 0 400 370 290 170 40
It
Qt 380 0 0 0 0 0 420 0 0 0 0 0 800
Dt 20 40 110 120 60 30 20 30 80 120 130 40 800
Ending 360 320 210 90 30 0 400 370 290 170 40 0 2280
School of Industrial Engineering & Management (IEM) Inventory Management
International University, VNU-HCM Instructor: Dr. Nguyen Van Hop

It

Total replenishment costs: 2*$25= $50

Total carrying costs: 2280*$0.2= $456
Total replenishment + carrying costs: $506

PROBLEM 3: Dynamic Programming Approach

A= $50
r= $1.05
v= $65
 H= r*v=1.05*65= $68.25
We neglect the cost of each unit in this problem.
Month Sequential Number Requirement (units)
January 1 350
February 2 200
March 3 0
April 4 150
May 5 500
June 6 600
July 7 450
August 8 350
September 9 200
October 10 0
November 11 150
December 12 200
Total 3150

Z1=0
c1,2= 50+68.25*200=13700
Z2= Z1+c1,2= 0+13700= 13700
 P2=1
School of Industrial Engineering & Management (IEM) Inventory Management
International University, VNU-HCM Instructor: Dr. Nguyen Van Hop

c1,3= 50+68.25*(200+0)+68.25*0=13700
c2,3= 50+68.25*0=50
Z3= min{0+13700, 13700+50}=min{13700, 13750}=13700
 P3=1
 Q1= 350+200+0= 550
c1,4= 50+68.25*(200+0+150)+68.25*(0+150)+68.25*150=44412.5
c2,4= 50+68.25*(0+150)+68.25*150= 20525
c3,4= 50+68.25*150= 10287.5
Z4=min{0+44412.5, 13700+20525, 13700+10287.5}= min{44412.5, 34225, 23987.5}= 23987.5
 P4= 4
c4,5=50+68.25*500= 34175
Z5=Z4+c4,5=23987.5+34175= 58152.5
 Q4= 150+500= 650
c4,6=50+68.25*(500+600)+68.25*600= 116075
c5,6=50+68.25*600= 41000
Z6=min{23987.5+116075, 58152.5+41000}= min{140062.5, 99152.5}= 99152.5
 P6= 5
 Q5=600
c5,7= 50+68.25*(600+450)+68.25*450= 102425
c6,7= 50+68.25*450= 30762.5
Z7= min{160577.5, 129915}=129915
=>P7=6
=>Q6=450
c6,8= 50+68.25*(450+350)+68.25*350= 78537.5
c7,8= 50+68.25*350= 23937.5
Z8=min{99152.5+78537.5, 129915+23937.5}= min{ 177690, 153852.5}= 153852.5
 P8=7
 Q7=350
School of Industrial Engineering & Management (IEM) Inventory Management
International University, VNU-HCM Instructor: Dr. Nguyen Van Hop

c7,9= 51237.5
c8,9= 13700
Z9= min{181152.5, 167552.5}= 167552.5
 P9=8
c8,10= 50+68.25*200= 13700
c9,10= 50
Z10= min{153852.5+13700, 167552.5+50}= min{167552.5, 167602.5}= 167552.5
 Q8=200+0=200
c8,11= 50+68.25*(200+0+150)+68.25*(0+150)+68.25*150= 44412.5
c9,11= 50+68.25*(0+150)+68.25*150= 20525
c10,11= 50+ 68.25*150= 10287.5
Z11=min{153852.5+44412.5, 167552.5+20525, 167552.5+10287.5}=min{198265, 188077.5,
177840}= 177840
=>P11=10
=>Q10=150
c10,12=37587.5
c11,12= 13700
Z12=min{205140, 191540}= 191540
=>P12= 11
=> Q11= 200
*We have the following table:
t 1 2 3 4 5 6 7 8 9 10 11 12 Total
Starting 0 200 0 0 500 600 450 350 200 0 150 200
It
Qt 550 0 0 650 600 450 350 200 0 150 200 0 3150
Dt 350 200 0 150 500 600 450 350 200 0 150 200 3150
Ending 200 0 0 500 600 450 350 200 0 150 200 0 2650
It

Total replenishment costs: 8*$50= $400

School of Industrial Engineering & Management (IEM) Inventory Management
International University, VNU-HCM Instructor: Dr. Nguyen Van Hop

Total carrying costs: 2650*68.25= $180862.5

Total replenishment + carrying costs: $181262.5