Business Forecasting and Simulation
Assignment Two (Simulation) – 2012/13 (weighted 50%)
Stock Control Policies of Warnsley Ltd.
Warnsley Ltd. is an established business which has been operating in the region for over 25 years. In order to expand the business, Warnsley Ltd. have just acquired a fledgling company called Lorrjon Ltd. Lorrjon Ltd. is still operating under its old name, although the plan is for both companies to operate under the name of the parent company, Warnsley Ltd. Although both companies sell the same product, their suppliers and stock control policies are currently different. The management of Warnsley Ltd. would like to consolidate procedures and policies in an effort to streamline processes. As a result, they would like to analyse the stock-control policies at both companies in order to adopt the best system in the long run.
The stock-control policies at the two businesses are described below:
Warnsley Ltd.
Place an order every 4 weeks. The quantity ordered at the start of the week will bring the stock level upto 100 items after allowing for any outstanding deliveries to customers. The in-coming delivery will arrive the week following the placement of the order with the supplier.
Lorrjon Ltd.
Place an order for 200 items when the stock level at the start of the week (after in-coming delivery has been received) is below 150 items, provided that no delivery from the supplier is outstanding. Any outstanding orders from customers will be dispatched as soon as a delivery is received from the supplier.
The lead time for in-coming deliveries is evenly distributed between 2, 3, 4, 5 and 6 weeks.
General (applies to both companies)
Orders are dispatched to customers as they are received if the goods are in stock. Customers are willing to wait until the items can be delivered. All in-coming deliveries are received at the start of the week.
The demand distribution is as follows:
Demand Frequency
50 42
60 36
70 24
80 12
90 6
The costs are as follows:
Stock-holding £2.50 per item per week (or pro rata).
Stock-out cost £3 per item per week (or pro rata).
Cost of placing an order £165
Unit price is £250.
Assume an initial stock level of 60 items for both companies.
Requirements:
1. Build analytical stock control model/s. What stock control policies do these model/s suggest? State clearly any assumptions you need to make in order to be able to apply these model/s.
2. For each of the policies given (Warnsley Ltd. and Lorrjon Ltd.), build a simulation model. Analyse both policies and recommend for:
i. Warnsley Ltd.: the re-order interval and the desired stock level after satisfying any outstanding orders.
ii. Lorrjon Ltd.: the re-order level and re-order quantity
For each policy, use your model to recommend a system which will provide a 95% service level.
3. Compare and contrast the models and results from (1) and (2) in a report.
Your analysis and recommendations must be presented in the form of a report of approximately 1,200 words for the attention of the Head Stores Manager.
Learning Outcomes Assessed
1 Apply simple deterministic and stochastic models relating to, for example, stock control and queuing theory. Analyse the requirements of a problem, the data available, and the data requirements for particular techniques, and comment on the suitability of those techniques in the analysis and solution of the problem.
2 Compare and contrast simulation modelling to other analytical modelling approaches Formulate a problem as a simulation and contrast this with one other relevant analytical modelling approach.
3 Formulate and build an appropriate simulation model. Build a simulation model, make appropriate assumptions, collect relevant data, and validate and verify the model.
4 Design experiments and use the simulation model to investigate alternative scenarios and propose policy alternatives. Design appropriate experiments, conduct statistical analysis of results, and propose policy alternatives.
The following is a guide as to how your work will be marked:
Analytical Models (20%) F E D (Range) C (Range) B (Range) A (Range)
Build analytical model/s & use them to suggest policy. Poor choice of models. Errors in the models. Poor layout and use of Excel. No indication of stock control policy as suggested by these models. Poor choice of models. Errors in the models. Poor layout and use of Excel. Suggestion of stock control policy is not derived from the models built. Poor choice of models. Errors in the models. Poor layout and use of Excel. Some indication of stock control policy as suggested by these models. Mostly accurate and appropriate models. Layout and use of Excel could be better. Clear indication of stock control policy as suggested by these models. Accurate and appropriate models. Good layout. Use of Excel could be better. Clear and full indication of stock control policy as suggested by these models. Accurate and appropriate models. Very good layout and use of Excel. Clear and full indication of stock control policy as suggested by these models.
Simulation Models (50%) F E D (Range) C (Range) B (Range) A (Range)
Build simulation models for Warnsley Ltd. and Lorrjon Ltd. and use them to suggest policy. Models which leave out significant aspects. Significant errors in formulae. Poor layout and use of Excel. No indication of stock control policy. Poor models which leave out major aspects. Errors in the models. Poor layout and use of Excel. Suggestion of stock control policy is not derived from the models built. Models which leave out important aspects. Major errors in formulae. Poor layout and use of Excel. Some indication of stock control policy as suggested by these models. Models which take most of the relevant aspects into consideration. Mainly accurate formulae with non-trivial errors. Layout and use of Excel could be better. Clear indication of stock control policy as suggested by these models. Comprehensive models which take all the relevant aspects into consideration. Mainly accurate formulae with minor errors. Good layout and good use of Excel. Clear and full indication of stock control policy as suggested by these models. Comprehensive models which take all the relevant aspects into consideration. Accurate formulae. Good layout and good use of Excel. Clear and full indication of stock control policy as suggested by these models.
Compare & Contrast Results (30 %) F E D (Range) C (Range) B (Range) A (Range)
Discuss your models and results; use these to arrive at conclusions/recommendations. Poorly presented report with very little discussion of the models’ results. No evidence of understanding of underlying assumptions. No conclusions and recommendations. Poor presentation. Poor discussion of most of the assumptions underlying the various models. No discussion of the methods or results. Poor conclusions and recommendations not derived from the discussion. Poor presentation. Poor discussion of most of the assumptions underlying the various models. No discussion of the methods. Poor conclusions and recommendations not derived from the discussion. The report includes some discussion of most of the assumptions underlying the various models. Discussion of the methods is not very clear. Conclusions and recommendations could be clearer. Presentation could be better. A comprehensive report with a good discussion of the assumptions underlying the various models. Discussion of the models with regards to the methods as well as the results. Clear conclusions and recommendations, but not very clearly derived from the discussion. Good presentation. A comprehensive report with a thorough discussion of the assumptions underlying the various models. Discussion of the models with regards to the methods as well as the results. Clear conclusions and recommendations clearly derived from the discussion. Very good presentation.
