Assignment
You are an inventory management consultant. You have been hired by Walmart to help optimize inventory management for their Dairy department. Your immediate task is building a Monte Carlo simulation for sales of Milk, Eggs and Cheese. The probabilities of monthly demand levels are:
|
Probability
|
Milk
|
Eggs
|
Cheese
|
|
0.05
|
184
|
268
|
288
|
|
0.10
|
200
|
299
|
318
|
|
0.15
|
224
|
302
|
330
|
|
0.05
|
240
|
310
|
350
|
|
0.15
|
258
|
345
|
362
|
|
0.10
|
280
|
368
|
376
|
|
0.15
|
318
|
378
|
392
|
|
0.10
|
304
|
400
|
413
|
|
0.10
|
358
|
411
|
450
|
|
0.05
|
374
|
444
|
490
|
The unit revenues and costs are given in the table below.
|
Product
|
Unit Revenue
|
Unit Cost
|
|
Milk
|
$1.86
|
$1.18
|
|
Eggs
|
$2.79
|
$1.98
|
|
Cheese
|
$3.39
|
$2.15
|
Each product has a separate display with an associated fixed monthly cost:
|
Product
|
Fixed Monthly Display Cost
|
|
Milk
|
$100
|
|
Eggs
|
$200
|
|
Cheese
|
$300
|
A. Build a table for the cumulative probability distribution for demand. It should be set up for use with the VLOOKUP function, with the cumulative probabilities on the left.
B. Build a table for tracking sales over one year (Jan 2021-Dec 2021) with separate columns for Milk, Eggs and Cheese. This will just be the randomized demand value for each item for each month (like in 10.1.2 from the lab exercise on Monte Carlo simulations). For this assignment, assume all demand is actually met (that is, sales = demand) and there is no other inventory loss except through sales.
C. Build a table for tracking total revenues, costs, and profit for the year. This table should use the information provided in your answer to B, above. Your table should calculate values for:
a. Total Revenue (based on the combined sales of all three products over the year)
b. Total Cost (also based on combined sales, and including cost of goods sold and fixed costs)
c. Profit/Loss (total revenue minus total costs)
D. Build a data table to generate 50 runs of the simulation and calculate the average profit of the 50 simulation runs. As in previous assignments, this must be an actual data table structure to earn full credit. Calculate the average profit over the 50 simulation runs.