Ebony Bath Soap Simulation and Risk Analysis The purpose of this assignment is to use analytics techniques to analyze a case problem. Part 1 Read Case St
Ebony Bath Soap Simulation and Risk Analysis The purpose of this assignment is to use analytics techniques to analyze a case problem.
Part 1
Read Case Study Case 15.2 “Ebony Bath Soap” from the textbook, and then complete the following items.
For Questions 1 and 2 of the case, use the Palisade DecisionTools Excel software to set up a simulation model and run a simulation with 500 trials for the case. Ensure that all Palisade software output is included in your files and that only one Excel file is open when running a simulation. Use the “Topic 3 Case Study Template” file as a starting point. Hint: The RiskSimtable function was be helpful for running the simulations.
Respond to Question 3 as written in the problem. Ignore the confidence interval portion of the question.
Respond to Question 4 as written in the problem.
To receive full credit on the assignment, complete the following.
Ensure that the Palisade software output is included with your submission.
Ensure that Excel files include the associated cell functions and/or formulas if functions and/or formulas are used.
Include a written response to all narrative questions presented in the problem by placing it in the associated Excel file.
Include screenshots of all simulation distribution results for output variables.
Place each problem in its own Excel file. Ensure that your first and last name are in your Excel file names.
Part 2
In a 500-750-word summary to company management, address the following. Include relevant charts and graphs within your summary, as needed.
Describe the case specific business requirements and how they can be communicated across all levels of the organization.
Based on the simulation results, discuss the Annual Cost output statistical distributions. Assume that your audience as minimal background in statistics.
Discuss which Annual Cost output probability distribution has the most dispersion, and explain why this is so.
Explain the descriptive, predictive, and prescriptive analytics that have been used to formulate the solutions to the business needs.
Based on the Annual Cost output statistical distributions and other information gleaned from your analysis, discuss the specific prescribed course of action you would recommend to company management and justify your recommendations. Include discussion of how the proposed analytics solutions can optimize organizational performance and effectiveness. Ebony Bath Soap Simulation
Inputs
Average demand
Stdev of demand
Unit holding cost
Prod change cost
Initial inventory
Current prod level
120
15
$30
$3,000
60
120
Simulation of 52 weeks
Week
Normal
Production policy:
If inventory <
If inventory >
Otherwise, don’t change production level.
Demand
Inventory
30 then produce
80 then produce
130
110
Annual cost
Next week
Production
Holding cost
Change cost
Weekly cost
CASE
15.2 EBONY BATH SOAP
anagement of Ebony, a leading manufacturer
More barn
costs. The weekly cost of holding one unit of
soap
in
inventory is $30 (one unit is 1000 cases of soap). The
marketing department estimates that weekly demand
averages 120 units, with a standard deviation of 15
units, and is reasonably well modeled by a normal
distribution. If demand exceeds the amount of soap
on hand, those sales are lost—that is, there is no
backlogging of demand. The production department
can produce at one of three levels: 110, 120, or 130
units per week. The cost of changing the production
level from one week to the next is $3000.
Management would like to evaluate the following
production policy. If the current inventory is less
than L = 30 units, they will produce 130 units in the
next week. If the current inventory is greater than
U = 80 units, they will produce 110 units in the next
week. Otherwise, Ebony will continue at the previous
week’s production level.
Ebony currently has 60 units of inventory on
hand. Last week’s production level was 120.
Questions
1. Develop a simulation model for 52 weeks of
operation at Ebony. Graph the inventory of soap
over time. What is the total cost (inventory cost
plus production change cost) for the 52 weeks?
2. Run the simulation for 500 iterations to estimate
the average 52-week cost with values of U
ranging from 30 to 80 in increments of 10. Keep
L = 30 throughout.
3. Report the sample mean and standard deviation
of the 52-week cost under each policy. Using the
simulated results, is it possible to construct valid
90% confidence intervals for the average 52-week
cost for each value of U? In any case, graph the
average 52-week cost versus U. What is the best
value of U for L = 30?
4. What other production policies might be useful
to investigate?
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