Finance

2. An important aspect of optimizing the fish finger production line is developing an inventory…

2. An important aspect of optimizing the fish finger production line is developing an inventory policy for raw materials used in the production process (oil, breadcrumbs, boxes, etc). A Lowliner food is considering three new policies inventories (EOQ, S-s, and S-R) and has Eddie to modify his simulation model to evaluate them. Eddie executes ten replications of his model under each inventory scenario and records the average daily inventory cost (in $Can). Results from the three models appear below:

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Policy

Run

EOQ

S-s

S-R

1

107.5

102.7

110.6

2

111.9

92.7

117.4

3

102.7

99.5

114.5

4

112.4

93.1

113.6

5

115.2

89.3

111.8

6

114.6

96.2

113.1

7

112.6

89.7

112.0

8

105.7

93.8

107.4

9

108.5

101.4

113.4

10

110.1

86.0

111.3

Mean

101.1

94.4

112.5

Variance

16

30.1

6.8

Assume that Eddie wishes to identify the best possible policy (where lower cost is considered better). Moreover, assume that Lowerliner wants to be 90% certain (i.e. a = 0.10) that the selected policy is the best. Using this information, can any of the three policies be identified as “best”?

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