In this modeling exercise, you are asked to determine an inventory level that would minimize the grand total cost for a two-hundred-month planning period.
- For each month, the demand follows the same pattern described below.
- Demand: normally distributed with a mean of 100, sd of 30
- Overage cost: 10 unit/USD
- Shortage cost: 5 unit/USD
- Once determined, you will not change the inventory level during the two-hundred-month period.
This problem exists a clear analytical solution using a newsvendor model. Students will have to do a brute-force approach to determine the cost minimizing inventory level.