1. Production-Inventory Simulation
Engineering Management, Information, and Systems

2. Stages of Processing
Jobs processed through one or more work centers, or processing stages
Job
orders
Completed
jobs
Single-stage process
Work
center
WC1
WC2
Two-stage process

3. What is Inventory?
Goods on-hand in excess of need
Examples:

4. 1-Stage System, 3-Week Plan
Production week 1, P1
Production week 2, P2 P3
Beginning inventory, I0
Ending inventory, I0
t=1
t=2
t=3
Inventory, I1 I2
Sales1 = min{Demand1, (P1 + I0)}
Sales2 = min{Demand2, (P2 + I1)}
Sales = min{D3, (P3 + I2)}
Week 1
Week 2
Week 3

5. Production+Inventory Example
Given: a 3-stage process:
Build product (1 day)
Paint & assemble (1 day)
Sell product for $3 profit
Any product not sold can be held in inventory for $1/day
Demand varies
How much to make/day?
Raw
materials
Finished goods for sale
Work in process 2 1

6. Example Week 1 10 4 2 3 5 Day (a) # built, Stage 1
(b) # painted, Stage 2
(c) # avail for sale
Demand
(e) # Sold
(f) Ending inventory
(g) Daily profit 1 10 4 2 3 5

7. Rules of the Game You decide how many to start making
WIP = yesterday’s production, (a)
Available = yesterday’s WIP + inventory (b+f)
Demand = random roll of two dice
Sold = minimum of {# available, demand}
Ending inventory = available-sold (c-e)
Profit = $3(# sold) - $1(ending inventory)

8. Simulation 1 Day (a) # built, Stage 1 (b) # painted, Stage 2
(c) # avail for sale
Demand
(e) # Sold
(f) Ending inventory
(g) Daily profit 1 2 3 4 5 6 7 8 9

9. Demand Possibilities

10. Demand Analysis

11. Simulation 2 Day (a) # built, Stage 1 (b) # painted, Stage 2
(c) # avail for sale
Demand
(e) # Sold
(f) Ending inventory
(g) Daily profit 1 2 3 4 5 6 7 8 9