Simulation

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MODEL INPUT PARAMETERS

Selling price p= 20 80000

70000
Purchase cost c= 5
60000

Profit ($)
Salvage value v= 2
50000

Goodwill cost g= 0 40000

30000
Mean demand μ= 5000
20000
STD of demand σ= 1000
10000
0
ADDITIONAL PARAMETERS 0
CDF graph 50

Scale graph 1

Sample size 10000

Critical Ratio = Cost of Understock / (Cost of Understock + Cost of Overst 83.33%

Optimal Order Size = Mean Demand + Z x STD 5967
Maximum Profit $69,148.51

Demand Distribution Parameters

0.05% 100
90%
Density (PDF)

0.04% 80%
Probability

70%
0.03% 60%
50%
0.02% 40%
30%
0.01% 20%
10%
0.00% 0%
1000 2000 3000 4000 5000 6000 7000 8000 9000 10000
 0.01% 20%

Den
Pr
10%
0.00% 0%
1000 2000 3000 4000 5000 6000 7000 8000 9000 10000

Probability for each order quantity inter# CumProb Demand

1 0.000000% 200
2 0.000211% 400
3 0.000541% 600
4 0.001335% 800
5 0.003167% 1000
6 0.007235% 1200
7 0.015911% 1400
8 0.033693% 1600
9 0.068714% 1800
10 0.134990% 2000
11 0.255513% 2200
12 0.466119% 2400
13 0.819754% 2600
14 1.390345% 2800
15 2.275013% 3000
16 3.593032% 3200
17 5.479929% 3400
18 8.075666% 3600
19 11.506967% 3800
20 15.865525% 4000
21 21.185540% 4200
22 27.425312% 4400
23 34.457826% 4600
24 42.074029% 4800
25 50.000000% 5000
26 57.925971% 5200
27 65.542174% 5400
28 72.574688% 5600
29 78.814460% 5800
30 84.134475% 6000
31 88.493033% 6200
32 91.924334% 6400
33 94.520071% 6600
34 96.406968% 6800
35 97.724987% 7000
36 98.609655% 7200
37 99.180246% 7400
38 99.533881% 7600
39 99.744487% 7800
40 99.865010% 8000
41 99.931286% 8200
42 99.966307% 8400
43 99.984089% 8600
44 99.992765% 8800
45 99.996833% 9000
46 99.998665% 9200
47 99.999459% 9400
48 99.999789% 9600
49 99.999921% 9800
50 100.000000% 10000
mulation of Newsvendor Model

Expected Profit
80000
70000
60000
Profit ($)

50000
40000
30000
20000
10000
0
0 2000 4000 6000 8000

Order size (units)

# Expected profit Order size Revenue Cost
Probability of
stockout:
16.67% 1 0 0 0 0
2 $15,000.00 1000 $20,000.00 5000
3 $29,992.08 2000 $39,991.20 10000
4 $44,784.34 3000 $59,760.38 15000
meters 5 $58,219.62 4000 $78,021.80 20000
6 $66,956.08 5000 $91,062.31 25000
100%
7 $69,148.51 6000 $96,831.68 30000
90%
8 $66,833.66 7000 $97,592.96 35000
Density (CDF)

80% 9 $64,149.77 8000 $97,944.19 40000

Cumulative

70% 10 $61,166.70 9000 $97,963.00 45000

60% 11 $58,406.12 10000 $98,229.02 50000
50%
40%
30%
20%
10%
0%
8000 9000 10000
 20%

De
C
10%
0%
8000 9000 10000

Density
Probabili
ty Approximated
0.0000004% 0.0000000%
0.0000000% -5σ
0.0000010% 0.0002112%
0.0002112% -5σ
0.0000025% 0.0003300%
0.0005413% -5σ 120%
0.0000059% 0.0007933%
0.0013346% -5σ
0.0000134% 0.0018325%
0.0031671% -5σ 0.1350% 100%
0.0000292% 0.0040677%
0.0072348% -4σ
0.0000612% 0.0086761%
0.0159109% -4σ 80%
0.0001232% 0.0177821%
0.0336929% -4σ
0.0002384% 0.0350209%
0.0687138% -4σ 60%
0.0004432% 0.0662760%
0.1349898% -4σ
0.2555130% -3σ 40%
0.0007915% 0.1205232%

0.0013583% 0.2106058%
0.4661188% -3σ
20%
0.0022395% 0.3536348%
0.8197536% -3σ 2.14%
0.0035475% 0.5705912%
1.3903448% -3σ
0%
0.0053991% 0.8846684%
2.2750132% -3σ 0 2000
0.0078950% 1.3180187%
3.5930319% -2σ 15.73%
0.0110921% 1.8868973%
5.4799292% -2σ
-2σ 13.59%
0.0149727% 2.5957368%
8.0756659%

-2σ
Den
0.0194186% 3.4313011%
11.5069670%
0.05%
0.0241971% 4.3585584%
15.8655254% -2σ
0.0289692% 5.3200145%
21.1855399% -1σ
0.0333225% 6.2397719%
27.4253118% -1σ 0.04%
0.0368270% 7.0325141%
34.4578258% -1σ
0.0391043% 7.6162032%
42.0740291% -1σ
50.0000000% -1σ
0.03%
0.0398942% 7.9259709%

0.0391043% 7.9259709%
57.9259709% 1σ 68.27%
1σ
0.0368270% 7.6162032%
65.5421742%
0.02%
0.0333225% 7.0325141%
72.5746882% 1σ
0.0289692% 6.2397719%
78.8144601% 1σ
0.0241971% 5.3200145%
84.1344746% 1σ 0.01%
0.0194186% 4.3585584%
88.4930330% 2σ
0.0149727% 3.4313011%
91.9243341% 2σ
0.0110921% 2.5957368%
94.5200708% 2σ 0.00%
96.4069681% 2σ 13.59% 0 2000 4
0.0078950% 1.8868973%

0.0053991% 1.3180187%
97.7249868% 2σ
0.0035475% 0.8846684%
98.6096552% 3σ 15.73%
0.0022395% 0.5705912%
99.1802464% 3σ
0.0013583% 0.3536348%
99.5338812% 3σ
0.0007915% 0.2106058%
99.7444870% 3σ 2.14%
0.0004432% 0.1205232%
99.8650102% 3σ
0.0002384% 0.0662760%
99.9312862% 4σ
0.0001232% 0.0350209%
99.9663071% 4σ
0.0000612% 0.0177821%
99.9840891% 4σ
0.0000292% 0.0086761%
99.9927652% 4σ
0.0000134% 0.0040677%
99.9968329% 4σ
0.0000059% 0.0018325%
99.9986654% 5σ
0.0000025% 0.0007933%
99.9994587% 5σ 0.1350%
0.0000010% 0.0003300%
99.9997888% 5σ
0.0000004% 0.0001319%
99.9999207% 5σ
0.0000001% 0.0000793%
100.0000000% 5σ
0.500000% 100.0000%
 8000 10000 12000

ts)
Salvage Demand F(x)

0 0.00003%
$0.00 4907 0.0032%
$0.88 4907 0.1350%
$23.96 4900 2.2750%
$197.82 4897 15.8655%
$893.77 4909 50.0000%
$2,316.83 4910 84.1345%
$4,240.70 4885 97.7250%
$6,205.58 4897 99.8650%
$8,203.70 4898 99.9968%
$10,177.10 4911 100.0000%
 Cumulative CDF

0 2000 4000 6000 8000 10000 12000

Density function PDF

0 2000 4000 6000 8000 10000 12000