ELEC6229 Coursework Monte Carlo Simulation A1
Revision History: bc1d11, 11/02/2021, version 7 Page 1 of 3
A1
Monte Carlo Simulation in Inventory Management
Please read through this document and complete the
coursework as required. The coursework submitted
(including the relevant program source files) should be all
your own work and reference to, quotation from, and
discussion of other work should be correctly
acknowledged.
Note: This coursework accounts for 20% of your final
mark for this module. Please spend no more than 20 hours
on this assignment.
ELEC6229 Coursework Monte Carlo Simulation A1
Revision History: bc1d11, 11/02/2021, version 7 Page 2 of 3
Monte Carlo Simulation in Inventory Management
Background: In the year 2100, human beings live on over 100 planets including Mars and the Moon,
with a new United Nations (UN) headquarters situated on Earth. Although these planets can provide most
of the goods for human beings’ consumption by themselves, there is a special product, called ‘Super
Apple’, that can only be produced on Earth.
The Mission: Authorised by the UN, you will be sent to Mars to open a new flagship store for ‘Super
Apple’ for a duration of 52 weeks. You will be offered a very competitive basic salary, plus a
performance related bonus.
The Market: The ‘Super Apple’ is an expensive nutritional product. Its weekly demand on Mars is a
random number with the following probability distribution
Table 1 probability distribution of the demand on Mars
Demand (D) 0 1 2 3 4 5 6
Probability (p) 0.04 0.09 0.27 0.4 0.16 0.02 0.02
Inventory Management: You are responsible for managing the store and your key job is to control the
inventory, including paying for warehouse costs, ordering from the earth etc. Due to transport limitations,
you will apply a fixed order policy, i.e. during these 52 weeks, you will order a fixed number units of
‘Super Apple’ from Earth once your stock is less than or equal to a fixed level of units.
Note: only integer number units of ‘Super Apple’ can be ordered.
Assumptions: (1) You will check your stock level at the end of each week (i.e. Friday at 17:00) and place
an order if necessary; (2) If you place an order, the ‘Super Apple’ will be delivered to you before 9:00 the
next Monday; (3) You start your job on the Friday before the 1st week with 0 initial stock.
Your Performance: The UN has decided to measure your performance based on your operational cost,
including:
1. Warehouse Cost: if at the end of a week you have any stock left, you will have to store them in a
special warehouse during the weekend due to the chemical property of the ‘Super Apple’. The cost is 5
gold coins per unit per weekend.
2. Short of Stock Penalty: if you cannot meet your customers’ demands for any week, i.e. your stock is
less than your demand, you will be charged by the UN a fixed penalty of 20 gold coins for that week.
3. Return Cost: on the last day of the 52th week, if you still have any stock left, you will need to return
them to the earth with a cost of 10 gold coins per unit.
Your key job is to minimise the cost over the whole 52 week period.
In this coursework, you are required to complete the following tasks:
Task 1: What would be the reasonable range of the order number and re-order stock level ? Without
using simulation, what would you choose for the order number and re-order stock level ? Please
explain your reason(s).
Task 2: For your chosen order number and re-order stock level , use Monte Carlo simulation to
estimate your expected total cost over the 52 weeks. Please generate 500 estimates of the expected total
cost. What is the sample mean and variance of your estimate? Use a histogram to visualize your result.
ELEC6229 Coursework Monte Carlo Simulation A1
Revision History: bc1d11, 11/02/2021, version 7 Page 3 of 3
Task 3: Instead of choosing order number and re-order stock level by intuition, use the Monte Carlo
simulation method to find the combination of and that will lead to the minimum expected total cost.
Is this choice the same as that arrived at by intuition? Please explain why they are (or not) the same.
Task 4: How confident are you about your conclusion in Task 3? Can you describe this mathematically?
How would you improve your confidence? Evidence this.
Task 5: Critically evaluate your work. Have you achieved the objectives? What problems did you find
during this work? What conclusions can you draw from your design? How would you improve your
estimate/design? From the experience of this work, what do you need to consider when solving a
practical problem?
Assessment of Your Work: The coursework accounts for 20% of your final mark for this module. You
will be asked to upload a report and relevant program source files (with clear instructions on how to run
the program) before the deadline using the ECS handin system.
Template of the Report: The project report should be written in the form of a TWO page length
conference paper using a template that is available on the IEEE Control System paper management
website
http://css.paperplaza.net/conferences/support/support.php
学霸联盟