Example 2.

7: The News Dealer's Inventory Problem

Click the button to recalculate the spreadsheet and generate a new trial.

Distribution of Newspapers Demanded

Demand Probabilities Cumulative Probabilities
Demand
Good Fair Poor Good Fair Poor
40 0.03 0.10 0.44 0.03 0.10 0.44
50 0.05 0.18 0.22 0.08 0.28 0.66
60 0.15 0.40 0.16 0.23 0.68 0.82
70 0.20 0.20 0.12 0.43 0.88 0.94
80 0.35 0.08 0.06 0.78 0.96 1.00
90 0.15 0.04 0.00 0.93 1.00 1.00
100 0.07 0.00 0.00 1.00 1.00 1.00

Seed for Random Numbers 12345

Simulation Table

Lost
Profit
Revenue from Salvage
Type of from Excess from Sale Daily
Day Newsday Demand Sales Demand of Scrap Daily Cost Profit
1 #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! $23.10 #VALUE!
2 #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! $23.10 #VALUE!
3 #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! $23.10 #VALUE!
4 #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! $23.10 #VALUE!
5 #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! $23.10 #VALUE!
6 #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! $23.10 #VALUE!
7 #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! $23.10 #VALUE!
8 #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! $23.10 #VALUE!
9 #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! $23.10 #VALUE!
10 #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! $23.10 #VALUE!
11 #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! $23.10 #VALUE!
12 #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! $23.10 #VALUE!
13 #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! $23.10 #VALUE!
14 #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! $23.10 #VALUE!
15 #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! $23.10 #VALUE!
16 #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! $23.10 #VALUE!
17 #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! $23.10 #VALUE!
18 #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! $23.10 #VALUE!
19 #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! $23.10 #VALUE!
20 #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! $23.10 #VALUE!
TOTAL PROFIT = #VALUE!
em Daily Profit
new trial. (Column I)
Bins Frequency
Type of Newsday -4 #VALUE!
Cumulative 0 #VALUE!
Type Probability
Probability 4 #VALUE!
Good 0.35 0.35 8 #VALUE!
Fair 0.45 0.80 12 #VALUE!
Poor 0.20 1.00 16 #VALUE!
20 #VALUE!
General Parameters >20 #VALUE!
Purchase Price $0.33
Selling Price $0.50
Scrap Value $0.05

Number Purchased
by News Dealer 70

Frequency of Daily Profit

12
10
8
Occurrences

6
4
2
0
-4 0 4 8 12 16 20 >20
Upper limit of bin
Experiment: Repeated Trials of the News Dealer's Inventory Problem
Number of Trials: 400
Link to Measure of Performance (Sample Values):
Name of Measure: Link
Total (20-Day) Profit #VALUE!
Click on Run Experiment to generate 400 trials, and to create
a histogram to show the distribution of the 400 samples of Total (20-Da
Response Table Multi-Trial Summary

Total (20-
Trial Day) Profit Bins Frequency Seed for Random Numbe
1 $114.70 $40 0
2 $140.60 $60 0
3 $138.90 $80 0 Histogram (Bin Frequencies for Total
4 $136.60 $100 10
5 $129.90 $120 78
6 $140.60 $140 145 160
145
7 $122.60 $160 129
8 $137.20 $180 34 140 129

Occurrences (No. of Trials)

9 $142.30 $200 4 120
10 $118.70 $220 0
11 $156.80 $240 0 100
12 $115.30 >$240 0 78
13 $156.30
80
14 $109.70 Total = 400 60
15 $136.70
40 34
16 $162.00
17 $142.30 Average $135.49
20 10
18 $145.70 Median $136.60 0 0 0
19 $105.20 0
20 $152.40 Minimum $86.60 40 60 80 100 120 140 160 180
21 $107.40 Maximum $198.00
Bin
22 $128.80
23 $159.80
24 $141.70
25 $172.10
26 $103.40
27 $109.10
28 $150.70 NOTE: Bin 2 is all values <= 60 and > 40.
29 $99.50 Bin 3 is all values <= 80 and > 60.
30 $86.60 Frequency counts the number of trials falling in the associated bin.
31 $146.80 For the News Dealer Problem, each trial consists of a simulation of 20 days.
32 $115.30 The experiment consists of 400 trials, and measures Total 20-Day Profit.
33 $151.30
34 $162.50
35 $140.00
36 $148.40
37 $124.30
38 $127.10
39 $133.20
40 $164.80
41 $124.90
42 $132.10
43 $138.80
44 $167.60
45 $158.00
46 $151.80
47 $118.60
48 $160.80
49 $107.40
50 $124.80
51 $132.20
52 $158.60
53 $117.00
54 $106.30
55 $123.70
56 $131.60
57 $119.80
58 $159.10
59 $130.50
60 $138.90
61 $124.80
62 $129.90
63 $129.90
64 $106.80
65 $167.00
66 $126.00
67 $163.10
68 $159.10
69 $146.20
70 $130.50
71 $136.10
72 $130.50
73 $154.10
74 $105.70
75 $151.80
76 $159.10
77 $109.70
78 $118.10
79 $142.80
80 $143.40
81 $123.20
82 $128.20
83 $144.00
84 $117.00
85 $114.10
86 $149.60
87 $173.20
88 $155.20
89 $147.30
 90 $167.00
91 $148.50
92 $178.80
93 $102.90
94 $111.40
95 $113.00
96 $164.20
97 $104.10
98 $133.80
99 $143.90
100 $169.30
101 $135.00
102 $118.10
103 $145.70
104 $151.90
105 $140.00
106 $129.30
107 $140.00
108 $124.90
109 $147.90
110 $151.80
111 $165.30
112 $159.70
113 $99.00
114 $138.40
115 $169.80
116 $152.40
117 $149.60
118 $141.10
119 $126.60
120 $102.30
121 $122.60
122 $138.30
123 $128.20
124 $132.70
125 $114.70
126 $140.60
127 $149.00
128 $133.80
129 $137.20
130 $162.40
131 $143.40
132 $129.90
133 $125.40
134 $112.50
135 $145.10
136 $126.50
137 $147.30
138 $149.60
139 $135.00
140 $133.80
141 $127.10
142 $161.40
143 $137.80
144 $152.30
145 $133.30
146 $108.00
147 $130.50
148 $113.60
149 $109.10
150 $124.90
151 $130.50
152 $127.10
153 $106.30
154 $141.70
155 $164.80
156 $116.50
157 $146.20
158 $144.00
159 $149.00
160 $124.30
161 $108.00
162 $136.60
163 $171.00
164 $113.10
165 $146.30
166 $113.60
167 $126.00
168 $194.60
169 $113.60
170 $128.20
171 $102.40
172 $132.70
173 $124.30
174 $150.20
175 $118.10
176 $154.00
177 $147.90
178 $151.30
179 $160.80
180 $137.80
181 $166.50
182 $146.20
183 $111.40
184 $153.00
185 $140.10
186 $150.70
187 $141.20
188 $181.10
189 $95.60
190 $125.90
191 $119.20
192 $132.20
193 $141.70
194 $138.80
195 $117.50
196 $128.20
197 $118.10
198 $138.30
199 $150.70
200 $144.60
201 $137.10
202 $133.80
203 $120.30
204 $112.40
205 $153.00
206 $128.80
207 $142.30
208 $138.90
209 $119.30
210 $132.10
211 $124.30
212 $149.60
213 $123.20
214 $112.50
215 $127.10
216 $134.40
217 $133.30
218 $136.10
219 $119.20
220 $124.90
221 $129.90
222 $116.90
223 $159.70
224 $164.70
225 $106.90
226 $158.60
227 $97.90
228 $135.50
229 $155.30
230 $102.40
231 $99.00
232 $122.00
233 $128.80
234 $145.70
235 $156.30
236 $147.90
237 $125.40
238 $151.90
239 $146.80
240 $170.40
241 $143.40
242 $104.00
243 $133.30
244 $158.60
245 $110.20
246 $144.50
247 $146.80
248 $141.10
249 $154.10
250 $122.60
251 $151.30
252 $141.70
253 $155.80
254 $138.90
255 $163.10
256 $110.20
257 $109.10
258 $136.70
259 $129.30
260 $140.00
261 $150.20
262 $106.90
263 $123.20
264 $100.10
265 $123.70
266 $125.40
267 $156.80
268 $131.60
269 $152.40
270 $155.70
271 $136.70
272 $160.90
273 $121.50
274 $124.20
275 $150.70
276 $142.20
277 $142.90
278 $145.10
279 $144.00
280 $133.20
281 $154.10
282 $142.30
283 $126.00
284 $101.80
285 $139.50
286 $127.70
287 $114.70
288 $135.00
289 $101.30
290 $145.70
291 $127.10
292 $147.40
293 $140.60
294 $98.40
295 $163.00
296 $120.90
297 $119.80
298 $108.60
299 $110.80
300 $130.50
301 $168.70
302 $132.10
303 $151.30
304 $132.20
305 $137.80
306 $135.00
307 $108.50
308 $122.00
309 $155.80
310 $198.00
311 $109.70
312 $144.50
313 $136.70
314 $120.90
315 $158.00
316 $122.00
317 $137.20
318 $147.90
319 $138.40
320 $132.20
321 $101.80
322 $95.10
323 $129.40
324 $132.10
325 $102.40
326 $160.80
327 $137.80
328 $131.60
329 $155.20
330 $129.30
331 $128.20
332 $144.00
333 $155.20
334 $127.10
335 $136.10
336 $147.90
337 $128.20
338 $137.70
339 $114.70
340 $131.60
341 $152.40
342 $91.10
343 $118.10
344 $150.70
345 $122.60
346 $144.00
347 $142.30
348 $135.50
349 $159.80
350 $143.40
351 $145.60
352 $128.80
353 $145.70
354 $129.90
355 $147.30
356 $159.70
357 $154.10
358 $138.30
359 $142.30
360 $88.30
361 $157.50
362 $139.50
363 $124.80
364 $140.60
365 $121.50
366 $145.10
367 $123.10
368 $144.00
369 $141.70
370 $102.30
371 $131.60
372 $142.80
373 $119.80
374 $170.90
375 $114.20
376 $102.90
377 $116.40
378 $109.70
379 $165.90
380 $163.60
381 $118.10
382 $123.70
383 $136.60
384 $190.70
385 $132.10
386 $156.40
387 $137.30
388 $150.70
389 $102.30
390 $147.90
391 $163.60
392 $177.10
393 $140.60
394 $135.50
395 $141.70
396 $129.40
397 $110.20
398 $160.80
399 $127.60
400 $118.10
oblem
You may change any value that is this color (green).
Then click on Run Experiment.
This cell is linked to the output of a trial, and is
the source of the data in Column B under Total (20-Day) Profit.
nerate 400 trials, and to create
he 400 samples of Total (20-Day) Profit.

Seed for Random Numbers 12345

in Frequencies for Total 20-Day Profit)

145
129

78

34

10
4 0 0 0

0 100 120 140 160 180 200 220 240 >$240

Bin

sociated bin.
imulation of 20 days.
otal 20-Day Profit.
Explanation of Model Logic:

You may modify the Example by changing any of the values with a green
background. Discuss the relative value of each s
variation in "Total 20-Day Profit". T

Average, Median, Minimum and Ma

How to generate random values: for understanding how total 20-day

For type of newsday and demand, use the VB function "Discrete" supplied in next.
this workbook. To see an example, look at the formula in cells C19 and C20.
To see the Visual Basic code, enter alt+F11 or click Tools/Macro/Visual Basic
Editor on the menu.
How to use it: Discrete(Range for Cumul Prob, Range for Service Times)

A "Gotcha" when using strings:

When I first solved this problem, I typed "Good ", "Fair" and "Poor" as the 3
possible types of Newsdays. In the Simulation Table in the Demand column, I
type "IF(C19="Good", …". Do you see my mistake?
It was comparing "Good" to "Good " (with an extra space at the end), so the
"IF" macro never found them equal. So it generated a "Good " day but never
used the "Good" probabilities to generate a demand. Luckily (for me!), I
caught the mistake. How?
I was not getting a Total Profit (over 20 days) nearly as high as we got in
previous editions of the book with the manual simulations. So I looked around
until finding the mistake.
he relative value of each statistic for gaining understanding of the
n "Total 20-Day Profit". That is, discuss the relative merits of:

Median, Minimum and Maximum, and the Frequency Graph,

standing how total 20-day profit varies from one 20-day period to the