Otto's Consulting Report Essay

2157 WordsFeb 23, 20139 Pages
Otto’s Auto Parts Statistical Report Hansen Consulting proudly presents the following statistical information for Otto’s Auto parts. Statistics is a branch of mathematics that makes it possible for you to gain an edge over your competitors by providing a method for collection of data, and a way to summarize and quantify it to represent real world observations from which predictions can be made. Statistics also includes stochastic modeling, which is a powerful tool that incorporates random variables to predict future outcomes. For decades insurance companies have successfully profited from using stochastic modeling for making predictions of unknown entities. Stochastic models can be run hundreds or even thousands of times to show the…show more content…
The long run average, or law of large numbers, makes it possible for owners and managers to better visualize how optimal strategies can be formulated in order to lower their costs and increase their systems’ performance and effectiveness. We recently ran a 500-week simulation to determine the optimal order quantity and reorder point for the titanium covers your company purchases and holds, for use in the internal assembly of your catalytic converters. In creating your titanium cover simulation we used random variables to simulate different titanium part demand values and supplier lead times for your manufacturing facility and analyzed the affect they had on your inventory, holding costs, shortage costs, and ordering costs for each week. Our analysis shows that your optimal strategy for order quantity to be 1,000 units, and your optimal reorder point to be 800 units. A 500-week simulation plot for your optimal strategy was generated (located on the next page) to demonstrate that the long run average begins to reveal itself at ~270 weeks. As the plot starts to “flatten out” near ~270 weeks, the long run average shows that your optimal strategy’s expected value is estimated at ~$307. 500 –Week Simulation Plot for Optimal Strategy Employee profile – Gender An employee profile was created using descriptive statistics and statistical estimation. Descriptive statistics is a procedure used

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