Inventory Management (and Simulation)
This scenario brings in a number of factors and data challenges that the business analyst must consider when approaching this type of problem. These challenges are included in italics below. Questions in italics do not need to be answered as part of this portfolio, but are included for consideration and classroom discussion.
Your warehouse stocks perishable goods, with a fixed delivery schedule.
Is this a reasonable assumption (the fixed delivery schedule) for this scenario?
You have an annual (52-week) contract for weekly delivery of one of your items.
When would you sign such a contract? What is the “financial analysis” counterpart to such a commitment?
The weekly customer demand for that item is Beta 4,4 between 80 and 120.
How would you determine this?
For every item you sell you make $10 profit.
Is it reasonable that you would know this information?
For every item you discard at the end of a week, you lose $5.
Is it reasonable that you would know this information?
For every customer demand not filled you estimate a $15 loss in customer faith.
Is it reasonable that you would know this information? How might you determine it?
How many items should you contract for in your weekly deliveries?