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  • IEDA2010 Assignment 4-2

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    Chris SHUM
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    The document discusses several examples of calculating critical ratios and optimal order quantities or limits using cumulative distribution functions and probability tables: 1) For a manufacturer and store, calculates the optimal order quantity as 800 bags based on a critical ratio of 66.67%, then recalculates for 1000 bags with a new critical ratio of 77%. 2) Calculates an optimal room quantity of 85 for a hotel based on a critical ratio of 27.78% from a normal distribution. 3) Calculates probabilities of insufficient tables or being fully booked for a restaurant based on no-show probabilities and critical ratios. 4) Compares exponential smoothing techniques for demand forecasting. 5) Calculates minimum order quantities for different cost

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    HKUST IEDA2010 Assignment 4-2

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    The document discusses several examples of calculating critical ratios and optimal order quantities or limits using cumulative distribution functions and probability tables: 1) For a manufacturer and store, calculates the optimal order quantity as 800 bags based on a critical ratio of 66.67%, then recalculates for 1000 bags with a new critical ratio of 77%. 2) Calculates an optimal room quantity of 85 for a hotel based on a critical ratio of 27.78% from a normal distribution. 3) Calculates probabilities of insufficient tables or being fully booked for a restaurant based on no-show probabilities and critical ratios. 4) Compares exponential smoothing techniques for demand forecasting. 5) Calculates minimum order quantities for different cost

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    © All Rights Reserved
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    12 views2 pages

    IEDA2010 Assignment 4-2

    Uploaded by

    Chris SHUM
    The document discusses several examples of calculating critical ratios and optimal order quantities or limits using cumulative distribution functions and probability tables: 1) For a manufacturer and store, calculates the optimal order quantity as 800 bags based on a critical ratio of 66.67%, then recalculates for 1000 bags with a new critical ratio of 77%. 2) Calculates an optimal room quantity of 85 for a hotel based on a critical ratio of 27.78% from a normal distribution. 3) Calculates probabilities of insufficient tables or being fully booked for a restaurant based on no-show probabilities and critical ratios. 4) Compares exponential smoothing techniques for demand forecasting. 5) Calculates minimum order quantities for different cost

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    © All Rights Reserved
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    of 2

    1.

    (a) First, calculate the cumulative distribution

    Demand Probability Cumulative Distribution

    200 7% 7%

    400 18% 25%

    600 19% 44%

    800 23% 67%

    1000 13% 80%

    1200 12% 92%

    1400 8% 100%

    Next, calculate the critical ratio


    Cu = 7–3 = 4; Co = 3–1 = 2
    CR = 4/(4+2) = 66.67%
    Check the cumulative distribution, Q = 800 yields the smallest quantity that is greater than 66.67%.
    Therefore, Ready-to-Go should order 800 bags.

    (b) Store’s overstock E[os] = (800–600)*19% + (800–400)*18% + (800–200)*7% = 152


    Store’s expected profit E[profit] = 4*(800–152) – 2*152 = 2288
    Manufacturer’s profit = 800*(3–2) = 800
    Expected profit of supply chain = 3088

    (c) Calculate the new critical ratio


    Cu = 7–3 = 4; Co = 3–1.8 =1.2
    CR = 4/(4+1.2) = 77%
    Check the cumulative distribution, Q = 1000 yields the smallest quantity that is greater than 77%.
    Therefore, Ready-to-Go should order 1000 bags.

    (d) Store’s overstock E[os] = (1000–800)*23% + (1000–600)*19% + (1000–400)*18% +


    (1000–200)*7% = 286
    Store’s expected profit E[profit] = 4*(1000–286) – 2*286 = 2284
    Manufacturer’s profit = 1000*(3–2) = 1000
    New expected profit of supply chain = 3284

    2.
    (a) Cu = 800–650 = 250; Co = 650
    CR = 250/(250+650) = 27.78%
    Use the normal distribution table, z(0.2778) = 0.14
    So Q = 80 + 0.14*35 = 84.9
    Q* = 85 rooms

    (b) Cu = 800; Co = 800–650 = 150


    CR = 800/(800+150) = 84%

    3.
    (a) P(not enough tables) = P(no-shows < 20) = 0.0288 + 0.0552 + 0.0961 + 0.1538 + 0.2283 + 0.3171
    + 0.4154 + 0.5170 + 0.6154 + 0.7052 + 0.7825 + 0.8455 = 47.603%

    (b) P(full) = P(no-shows <= 15) = 0.0288 + 0.0552 + 0.0961 + 0.1538 + 0.2283 + 0.3171
    + 0.4154 + 0.5170 = 18.117%

    (c) Cu = 200; Co = 500


    Net loss is 300 if Holiday Inn cannot honor a reservation.
    CR = 200/700 = 28.57%
    We find P(no-show <= N) is at least 28.57%. From the table, we get P(no-show <= 12) is 22.83%
    and P(no-show <= 13) is 31.71%. The optimal overbooking limit is 13 rooms.

    4.
    (a) i. F24 + (A21 + A22 + A23)/3 = 390.67
    ii. 0.1*407 + 0.4*398 + 0.5*367 = 383.4
    iii. 408.60281122139 + 0.4*(367−408.60281122139) = 391.9617

    (b) Exponential smoothing technique with a smooth constant of a = 0.4 is the most accurate.

    5.
    (a) min(6.03–5.99/3*0.01, 5.99–5.97/3*0.01) = 0.67
    (b) min(6.03–6/3*0.01, 6–5.97/3*0.01) = 1
    (c) min(6.03–6/3*0.005, 6–5.97/3*0.005) = 2

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