is described in column J on the worksheet. We model the depot
as a process because items enter as a lot from the supplier
and must be processed before being sent to the distributors.
The weekly demand of 1500 items is pushed into the system at
the depot in cell J23. The items have the value of $100/unit
at the depot. We choose to replenish the inventory every two
weeks with a lot of 3000 units. The setup cost for an order
is $1000. The setup cost as well as the holding cost for WIP
is included in the WIP cost reported in J17. The purchase cost
of the items and the revenues from their sale are not included
because these do not affect the inventory policy.
Each lot entering the depot must be processed. The processing
time includes a fixed time of 0.5 weeks. The variable time of
0.0001 weeks is the time required to check each incoming item
for quality. Items are shipped from the depot to the distribution
centers in lots of 600 units.
The distribution centers are described in columns K and L.
They are similar except that the center in column K interacts
directly with local customers and the center in column L distributes
to another set of local distributors. The unit processing time
for Dist. 2 assumes that individual customers require additional
processing time. The local distributors receive deliveries in
lots of 200. After processing, the lots are delivered to individual
Row 18 shows the number of processors necessary to provide
the service generated by the flow rate. Row 19 shows the integer
number of servers given the maximum utilization rate of each
server. For queuing components this utilization determines the
number of servers used in the WIP model, and the utilization
must be strictly less than 100%.
The system results are in column O. The system WIP is the sum
of the component WIP's. The system cycle time is the system
WIP divided by the total flow entering the system (1500). This
is the residence time in the system averaged over all units.
Notice that the cycle time for the distribution center at 2
is almost 7.5 weeks, which is greater than the number in cell
The WIP cost in O17 is a result of interest. The modeler may
want to search over the controllable variables, such as the
lot sizes, to lower this cost. The add-in evaluates a particular
plan, but it does not directly determine the optimum plan. The
cost of WIP is a very nonlinear function of the lot sizes, and
the existence of local minimum solutions makes the optimization
problem very difficult.