An Auto Parts Store Wants to Simulate Its Inventory System

question 57

Multiple Choice

An auto parts store wants to simulate its inventory system for engine oil. The company has collected data on the shipping time for oil and the daily demand for cases of oil. A case of oil generates a $10 profit. Customers can buy oil at any auto parts store so there are no backorders (the company loses the sale and profit) . The company orders 30 cases whenever the inventory position falls below the reorder point of 15 cases. Orders are placed at the beginning of the day and delivered at the beginning of the day so the oil is available on the arrival day. An average service level of 99% is desired. The following spreadsheets have been developed for this problem. The company has simulated 2 weeks of operation for their inventory system. The current level of on-hand inventory is 25 units and no orders are pending.
-Using the information in Exhibit 12.3, what Risk Solver Platform (RSP) function should be used in cell I8 to determine the lead time for an order?

• A)=PsiDiscrete($B$6:$B$8, $C$6:$C$8)
• B)=PsiPoisson(Data!$B$6:$B$8,$Data!$C$6:$C$8)
• C)=PsiBinomial(Data!$B$6:$B$8,$Data!$C$6:$C$8)
• D)=PsiNormal($B$6:$C$8)

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Definitions:

Commodity Products

Products that are largely interchangeable with others of the same type because they have no significant differentiation.

Market Price

The current price at which an asset or service can be bought or sold in the marketplace, determined by supply and demand dynamics.

Oligopolistic Market

A market structure characterized by a small number of large firms dominating the industry, with significant barriers to entry for new competitors.

Price Wars

A competitive situation in which retailers and manufacturers continuously reduce prices to outdo each other, often resulting in minimal profits.