Space
IOE 202: lecture 3 outline
Announcements
Last time...
Optimization problems and optimization models
Another example of a Linear Programming model: Monet
picture frames
Linear Programming (LP) optimization models — brief history
Solving small LP models graphically and interpreting solutions
IOE 202: Operations Modeling, Fall 2009
Page 1
Space
Last time
Extension of the EOQ model for inventory management:
quantity discounts
Pet food supplier’s inventory problem
Does not fit EOQ framework; di
ff
erent model needed
Identified
Decisions that need to be made
Performance measure used to evaluate solutions
Restrictions/constraints on decisions
Simplifying assumptions made in the modeling process
Started formulating a model of the problem
IOE 202: Operations Modeling, Fall 2009
Page 2
This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
Space
Another inventory management problem
1
•
You are the Michigan distributor of Nature’s Peak, a highend brand of
frozen dog food. You have (prepaid) contracts with local “boutique” pet
stores to deliver, in each of the next 4 months, respectively, 50, 65, 100, and 70
lb of food, and these orders must be filled on time.
•
You obtain the food from the manufacturer at wholesale prices which vary
month to month. In the next four months, unit prices are $5, $8, $4, and $7
per pound, respectively, and you can buy at most 80 lb each month.
•
Food needs to be delivered to the stores at the end of each month. You place
your order with the manufacturer in the beginning of each month, receive your
order at the end of the month, and immediately deliver food to the local stores.
•
If you have food remaining after the demand has been satisfied, you can keep
some of in your wearhouse at a cost of $2 per pound per month until the next
delivery, and donate the rest to the Humane Society.
•
In 4 months, Nature’s Peak is planning to change the recipe and packaging
for this food. If you have any food left at that time, you can sell it to discount
pet stores in the area for $6 per pound. (Until then, the company wants to
maintain the product’s highend image.)
•
How should you manage your inventory for the next 4 months?
1
Section 4.12 of Denardo describes a problem in which such inventory
management issues are part of the decisions
IOE 202: Operations Modeling, Fall 2009
Page 3
Space
Operational decisions in the pet food distributor’s problem
What decisions do you need to make for the coming 4
months?
How many pounds of food to order in each of the next 4
months
How many pounds of food to store in each of the next 3
months, and how much to sell after 4th month
How many pounds of food to donate in each of the next 4
months
What performance measure would you use to compare
di
ff
erent decisions?
Net cost (Ordering and holding costs, minus the revenue from
resale at the end) — to be minimized
What constraints (restrictions) must your decisions satisfy?
This is the end of the preview.
Sign up
to
access the rest of the document.
 Fall '09
 MarinaEpelman
 Operations Research, Optimization, Operations Modeling

Click to edit the document details