This article participated in the 3rd edition of the Piórem Logistyka Competition.
1. Problem formulation and defining the modeling objective (model definition). Fig. 1.
The objective of the developed model is to determine the order quantity and inventory level (reorder point) such that total inventory costs are minimized.
Fig. 1. Components of the simulation model (own elaboration)
2. Establishing data for the model
The model’s input data were established based on historical observations of selected system characteristics, which serve as the basis for identifying the values of the system’s input parameters. Figure 1 shows the computer application menu. Developing the menu involves assigning appropriate macros to user forms by “clicking”: Tools – Macro – Record New Macro, and then: View – Toolbars – Forms. The macro buttons assigned in this way trigger the corresponding procedures.
Figure 2 presents the analysis of the model’s “input” data, i.e.:
- minimum inventory level (reorder point) at which an order is placed,
- order quantity,
- unit inventory costs (ordering, holding, stockout (shortage) costs),
- initial inventory level.
Fig. 2. Input data analysis (own elaboration)
The basis for the input data analysis is the analysis of inventory costs. The ordering cost is a fixed cost, independent of the inventory size, but its value is optimized using a statistical quality control module for goods. The stockout (shortage) cost is the sum of fixed and variable costs. Fixed costs, independent of the shortage size, are the costs of emergency purchase (procurement) of goods to the warehouse. Due to the adopted customer service level, they are calculated in the model as the probability of a shortage occurring in each replenishment cycle. Variable costs are costs associated with lost margin on each unsold item. They arise when demand exceeds supply. Inventory holding costs are variable costs, dependent on the quantity of goods stored in the warehouse. They are calculated as the product of the annual holding cost coefficient, the quantity of goods in the warehouse, and the unit purchase price. The basis for building this sheet is the “Control Toolbox” launched via the “View – Toolbars” icon. The sliders shown in Figure 2 allow for the appropriate selection of input data.