Monte Carlo Simulation

Exercise - REG Class

Exercise 1

ABC stores sells several brands of major kitchen appliances. Past sales for
a particular model of refrigerator have resulted in the following
probability distribution for demand.

Demand per week 0 1 2 3 4

Probability 0.2 0.4 0.2 0.15 0.05

Lead time (weeks) 1 2 3

Probability 0.15 0.35 0.5
Exercise 1
Based on the inventory policy, the company has decided to order
10 units each time an order is placed. The holding cost is $1 per
week for each unit that is left in inventory at the end of week.
The stockout cost has been set at $40 per stock-out. The
company has decided to place an order whenever there are only
two refrigerators left at the end of the week. Lead time is varied,
when lead time is 1 week, the order will be placed at the end of
the period and will received in the beginning of week 3. Order
cost is $25 per order.
Exercise 1

1. Simulate 10 weeks of operation, assuming that there are currently 5

units in inventory. Random numbers for demand: 22, 10, 55, 88, 80,
48, 35, 67, 98, 78 and random number for lead time: 35, 14, 27, 9, 77
2. Determine the average lost sales, average no of order and average
ending inventory. Then calculate the total stockout cost, total order
cost and total holding cost for 10 weeks of operation.
3. Generate your own random number in MS. Excel for demand and
lead time. Simulate again 10 weeks of operation, assuming that there
are currently 5 units in inventory. Explain!
Exercise 2

Burger Queen wants to simulate the activity in the single drive-through

service. The time between arrivals of the customer in the drive-through
window, service time and their probabilities are presented in the table
below. Assume the drive-through opens at 6 AM and that the first arrival
occurs afterward.
1. Simulate the first three activity with random number for arrival:16,
33, 27 and random number for service time: 82, 97, 51
2. How long 2nd customer has to wait?
3. At what time does the 3th customer leaves the system?
Exercise 2
Time between
1 2 3 4
arrivals
Probability 0.2 0.3 0.3 0.2

Service time 1 2 3
Probability 0.3 0.5 0.2