Presented to the Department of Industrial Engineering

De La Salle University - Manila

Term 2, A.Y. 2018-2019

In partial fulfillment
of the course
In Course LBYIEEG

CASE 2: FRENCH BAKERY

Mary Grace M. Valdez

Submitted to:
Ms. Giselle Joy C. Esmeria
I. Background of the Study
A. Introduction
French Bakery Inc. bakes bagels every morning in batches of twelve-piece (12).
Bagels are sold in the afternoon, which the customers also buy by the dozens. History of
company sales show that a customer’s order may vary from one (1) dozen to four (4)
dozens based on the probabilities of Table 1.

Table 1. Probability Distribution for Dozens of Bagels Ordered / Customer

Number of Dozen Ordered/Customer Probability

1 0.35

2 0.25

3 0.25

4 0.25

Moreover, a data on bagel customer arrival .was also given in Table 2.

Table 2. Probability Distribution for the Number of Bagel Customers/ Day

Number of Customers/Day Probability

8 0.35

10 0.30

12 0.25

14 0.10

B. Problem Statement
French Bakery Inc. knows that it is important to know the system behavior of
their demands. It will allow the company to turn this knowledge of the system behavior
into refining customer service and ensure a profitable cash flow (Business News Daily,
2018).

French Bakery Inc. sells bagels for $4.50 per dozen from the $3.80 each dozens
investment of making it. Anything that does not sell for the day are sold half-price at a
local grocery store. Given the probability of distribution of demands per customer and
customer per day, the company now wants to know if the cash flow are profitable at the
current production rate while selling at its current price.

Experimentation with the real system is costly and risky, while it is too complex
for any good decisions be relegated solely to experience and intuition. Simulation study is
 then a preferred alternative to gain insight to the French Bakery Inc.’s system behavior on
demand.

C. Objectives
The objectives of the study are:

1. State all relevant assumptions of the simulation study.

2. Create a five-day (5) simulation of the system.
3. Advise the number of dozens French Bakery Inc. should bake every morning based on
the 5-day simulation supported by mathematical computations.
4. Provide insight on the system behavior through graph and how sensitive the system
performance is to number of dozens of bagels baked each morning.
5. Use Linear Congruential Method (LCM) in creating the simulation.

II. Elements of the System

French Bakery Inc. follows the following assumptions based on its current system:

1. The customers will be served at the basis of First Come, First Served.
2. The arrival of customers are random.
3. The characteristic of the customer’s activities are only going and going out of the store.
4. The servers will immediately serve customers when they arrive.
5. The servers will never be idle when there is queue.
6. The random numbers generated are independent and uniformly distributed.
7. All unsold bagels are automatically sold to the local grocery store at half the price.
8. The probabilities, costs, and other figures given in the case will not be change for the
course of the simulation.

The simulation study also consists of the following components.

Table 3. System Components

Entities Attributes Activities Events Variables

Profits from bagels Number of customers

Customer Paying for bagels Arrival of customers
sold to customer bagels per day

Profits from bagels

Number of orders per
Bagels sold to local grocery Ordering of customers
customer
store

Profit/Loss per day Departure of customers

III. Validation and Simulation
Using the Linear Congruential Method (LCM), the formula given was used in
order to generate random numbers.
X i+1 = aX i + c − { aX i +c
m }m
The first step of the simulation process is getting the number of customers per
day.

Table 4. RANDOM NUMBER GENERATION BY MIXED (LINEAR) CONGRUENTIAL METHOD

a= 5 c= 19
​
x​0= 17 m= 104
Customers Per Day
Day(​i) xi a(x(i​))+c x(i+1)​ No. of Customers
0 17 104 0
1 0 19 19 0.1900 8
2 19 114 10 0.1000 8
3 10 69 69 0.6900 12
4 69 364 52 0.5200 10
5 52 279 71 0.7100 12

By substituting the given numbers to the formula, the first random number, 0.19,
was generated. The function VLOOKUP was used in order to identify the correct number
of days the random number fall into (Appendix 1). Since 0.19 falls between the 0 and
0.35, the probability for eight (8) customers, 8 was then assigned as the number of bages
customers there will be for that day. Day 2 to 5 was performed in the same way.

After getting the number of customers per day, these numbers will then be used
for the number of times a random number should be generated to find out the number of
bagels bought by a customer for that day. As an example, Day 1 has 8 customers based
on the first simulation. These 8 customers will then be the number of people who will
buy bagels for Day 1, as such, there will be 8 random numbers that needs to be generated
in order to find out how many dozen bagels each were bought by the 8 customers.

Table 5. RANDOM NUMBER GENERATION BY MIXED (LINEAR) CONGRUENTIAL METHOD

a= 9 11
x​0​= 11 100
Bagels Per Customer (Day 1)
Customer(​i) xi a(x(i​))+c x(i+1)​ No. of Bagels
0 11 110 10
1 10 101 1 0.0100 1
2 1 20 20 0.2000 1
 3 20 191 91 0.9100 4
4 91 830 30 0.3000 1
5 30 281 81 0.8100 3
6 81 740 40 0.4000 2
7 40 371 71 0.7100 3
8 71 650 50 0.5000 2

The substitution to the LCM formula of the given numbers was done in order to
generate the random numbers. The same as with the first simulation, the VLOOKUP
function was used in order to find in what probability does the random number fall under
(Appendix 2). For customer number 1, random number is 0.01 simulating that customer
number 1 bought only a dozen of bagels for Day 1. The summary of the simulation
results can be found in Table 6.
Table 6. Summary of Results

Day Customers/Day Bagels (dozen)/Customer Total No. of Bagels/Day Profit/Day

1 1
2 1
3 4
4 1
Day 1 17 dozens $27.20
5 3
6 2
7 3
8 2
1 4
2 2
3 3
4 3
Day 2 19 dozens $30.40
5 1
6 4
7 1
8 1
1 2
2 1
3 2
4 1
5 3
6 4
Day 3 33 dozens $52.80
7 3
8 4
9 3
10 3
11 4
12 3
1 1
Day 4 23 dozens $36.80
 2 3
3 3
4 1
5 2
6 1
7 1
8 3
9 4
10 4
1 3
2 1
3 4
4 1
5 1
6 3
Day 5 26 dozens $41.60
7 2
8 2
9 4
10 1
11 1
12 3

IV. Analysis and Sensitivity

Based on the simulation, the profit was computed if the French Bakery Inc. was
able to exact the baked bagels (in dozens) to the exact demand per day. The given
formula below was used to compute the profit per day:
P rof it/Day = Demand P er Day (P rice per dozen − C ost of Baking P er Dozen)
However, the exacting production to the demand is not feasible. Figure 1 shows
the behavior of the system for dozen baked more than what is demanded.
 The blue line shows the profit at baking bagels in the amount that is demanded.
The red line shows the profit if the production of bagels goes over a dozen, the yellow
line by two (2) dozens, and the green line by three (3) dozens. It can be observed that for
any day, when supply is greater than demand, the profit of the company goes down.
Table 7 shows the uniform increment of loss per dozen that was not sold to the bagel
customers.
Table 7
Profit Loss
Day Baked Exact Amount More than 1 dozen More than 2 dozens More Than 3 dozens
Day 1 $0.00 $1.10 $2.20 $3.30
Day 2 $0.00 $1.10 $2.20 $3.30
Day 3 $0.00 $1.10 $2.20 $3.30
Day 4 $0.00 $1.10 $2.20 $3.30
Day 5 $0.00 $1.10 $2.20 $3.30

V. Conclusion and Recommendations

Based on the results of the simulation, the French Baker Inc. should baked dozens
of bagels in the amount of 17 (Day 1), 19 (Day 2), 33 (Day 3), 23 (Day 4), 26 (Day 5).
However, since the simulation is not comprehensive and in-depth, it must not be followed
at the absolute, especially that there is an accompanying cost for every dozen exceeding
demand. It is recommended that further study be made in order for the simulation to be
more reliable. Moreover, an optimization model will help the French Bakery Inc. to find
the optimal number of dozens of bagels to bake everyday.
VI. References
 Salo, A. (2015). Behavioral Elements in Behavioral Elements in Simulation Models.
Retrieved
from
https://www.suomenpankki.fi/globalassets/en/financial-stability/payment-and-sett
element
-system-simulator/events/sempres10-salo.pdf

Uzialko, A. C. (2018, August 03). How Businesses Are Collecting Data (And What
They're
Doing With It). Retrieved from
https://www.businessnewsdaily.com/10625-businesses-collecting-data.html

VII. Appendix

Probability Distribution for the Number of Customer Bagels Per Day

Probability Lower Bound Upper Bound Customers/Day
0.35 0.00 0.35 8
0.30 0.36 0.65 10
0.25 0.66 0.90 12
0.10 0.91 1.00 14
Appendix 1

Probability Distribution for the Number of Bagel Dozens Ordered Per Customer
Probability Lower Bound Upper Bound Dozens/Customer
0.35 0.00 0.35 1
0.25 0.36 0.60 2
0.25 0.61 0.85 3
0.15 0.86 1.00 4
Appendix 2

RANDOM NUMBER GENERATION BY MIXED (LINEAR) CONGRUENTIAL METHOD

a= 5 c= 19
x​0​= 17 m= 104
Customers Per Day
Day(​i) xi a(x(i)​ )+c x(i+1)​ No. of Customers
0 17 104 0
1 0 19 19 0.1900 8
2 19 114 10 0.1000 8
3 10 69 69 0.6900 12
 4 69 364 52 0.5200 10
5 52 279 71 0.7100 12
6 71 374 62 0.6200 10
RANDOM NUMBER GENERATION BY MIXED (LINEAR) CONGRUENTIAL METHOD
a= 9 c= 11
x​0​= 11 m= 100
Bagels Per Customer (Day 1)
Customer(​i) xi a(x(i)​ )+c x(i+1)​ No. of Bagels
0 11 110 10
1 10 101 1 0.0100 1
2 1 20 20 0.2000 1
3 20 191 91 0.9100 4
4 91 830 30 0.3000 1
5 30 281 81 0.8100 3
6 81 740 40 0.4000 2
7 40 371 71 0.7100 3
8 71 650 50 0.5000 2
RANDOM NUMBER GENERATION BY MIXED (LINEAR) CONGRUENTIAL METHOD
a= 9 c= 11
x​0​= 22 m= 100
Bagels Per Customer (Day 2)
Customer(​i) xi a(x(i)​ )+c x(i+1)​ No. of Bagels
0 22 209 9
1 9 92 92 0.9200 4
2 92 839 39 0.3900 2
3 39 362 62 0.6200 3
4 62 569 69 0.6900 3
5 69 632 32 0.3200 1
6 32 299 99 0.9900 4
7 99 902 2 0.0200 1
8 2 29 29 0.2900 1
RANDOM NUMBER GENERATION BY MIXED (LINEAR) CONGRUENTIAL METHOD
a= 9 c= 11
x​0​= 35 m= 100
Bagels Per Customer (Day 3)
Customer(​i) xi a(x(i)​ )+c x(i+1)​ No. of Bagels
0 35 326 26
1 26 245 45 0.4500 2
2 45 416 16 0.1600 1
3 16 155 55 0.5500 2
4 55 506 6 0.0600 1
5 6 65 65 0.6500 3
 6 65 596 96 0.9600 4
7 96 875 75 0.7500 3
8 75 686 86 0.8600 4
9 86 785 85 0.8500 3
10 85 776 76 0.7600 3
11 76 695 95 0.9500 4
12 95 866 66 0.6600 3
RANDOM NUMBER GENERATION BY MIXED (LINEAR) CONGRUENTIAL METHOD
a= 9 c= 11
x​0​= 37 m= 100
Bagels Per Customer (Day 4)
Customer(​i) xi a(x(i)​ )+c x(i+1)​ No. of Bagels
0 37 344 44
1 44 407 7 0.0700 1
2 7 74 74 0.7400 3
3 74 677 77 0.7700 3
4 77 704 4 0.0400 1
5 4 47 47 0.4700 2
6 47 434 34 0.3400 1
7 34 317 17 0.1700 1
8 17 164 64 0.6400 3
9 64 587 87 0.8700 4
10 87 794 94 0.9400 4
RANDOM NUMBER GENERATION BY MIXED (LINEAR) CONGRUENTIAL METHOD
a= 9 c= 11
x​0​= 39 m= 100
Bagels Per Customer (Day 5)
Customer(​i) xi a(x(i)​ )+c x(i+1)​ No. of Bagels
0 39 362 62
1 62 569 69 0.6900 3
2 69 632 32 0.3200 1
3 32 299 99 0.9900 4
4 99 902 2 0.0200 1
5 2 29 29 0.2900 1
6 29 272 72 0.7200 3
7 72 659 59 0.5900 2
8 59 542 42 0.4200 2
9 42 389 89 0.8900 4
10 89 812 12 0.1200 1
11 12 119 19 0.1900 1
12 19 182 82 0.8200 3
Appendix 3