A distribution of lead times in an inventory problem indicates that lead time was 1 day 20 percent of the time, 2 days 30 percent of the time, 3 days 30 percent of the time, and. 4 days 20 percent of the time. This distribution has been prepared for Monte Carlo analysis. The first four random numbers drawn are 06, 63, 57, and 02. The average lead time of this simulation is
A) 1.75 days
B) 2 days
C) 3 days
D) 3.5 days
E) none of these

Question

Quizplus · Accepted Answer

We can use the Monte Carlo simulation method to find the average lead time. To do this, we associate each range of lead time percentages with a range of random numbers from 0 to 99. Then we generate random numbers and use them to determine the lead time for each simulation run.

The ranges are:
- 0 to 19: lead time of 1 day
- 20 to 49: lead time of 2 days
- 50 to 79: lead time of 3 days
- 80 to 99: lead time of 4 days

Using the first four random numbers (06, 63, 57, and 02), we get the following lead times:
- Simulation 1: lead time of 1 day
- Simulation 2: lead time of 3 days
- Simulation 3: lead time of 3 days
- Simulation 4: lead time of 1 day

The average lead time is (1+3+3+1)/4 = 2 days.

Therefore, the best choice is B.

A Distribution of Lead Times in an Inventory Problem Indicates