Is it possible, that all buyers from the same company will order the same amount of inventory, if they will have the identical conditions? Let's check how big fluctuation in answers we will get!

1. Fairy tale:
Mr.Smart from LaLiMa
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2. My dear readers!
I would like to tell you a very old fairy tale. Some said
it is more than 100 years old. But some claimed it is
more than 2000 years old. From this fairy tale, you
would be able to learn that our issues of Supply
Chain Management in current modern world are as
old as our civilization…
In our current days, this fairy tale is told by
grandmothers and professors to their children and
students all around the world before going to sleep (in
a lecture)…
Here the fairy tale goes…
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3. Once upon a time, there was a strong kingdom in the
West called LALIMA, which located in the middle of
nowhere. People of LALIMA lived happily and wealthily,
but under tight control of LALIMA Royal Family.
The people of LALIMA were very proud of their kingdom,
as they have the cleanest city in the world, and the
citizens of LALIMA were all smart people. 3
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4. The LALIMA Royal Family controlled all the
economy in the country. One day, after reading
clever books from the East, King Paul the Daru
III, King of LALIMA, declared a new concept of
“Free Market”.
People of LALIMA did not know what that was,
but they felt very proud of the idea, as they loved
their King and Queen very much.
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5. In Southern city of LALIMA, lived a smart
dude called Mr. Smarty. Mr. Smarty worked
as the Purchaser for Royal Palace. He
loved his job very much. This job gave him
a lot of satisfaction – The Royal Palace
granted him power to dictate all delivery
conditions and prices, because he was
good at negotiations with suppliers. He
could not always get goods from the
suppliers on time, but he had a good
punishment system that worked very well.
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6. In one beautiful morning, while Mr.
Smarty was having his LALIMA smart
coffee at home, Mr. Smarty received a
letter from State Water Supply
Company of LALIMA “Justwater”:
JUSTWATER
After introducing a new technology of recycling
domestic water from sewage water it is decided
that every citizen of LALIMA should order water
in necessary amount in advance.
We request that citizens of LALIMA send their
order for their monthly demand at the end of
each month.
Every citizen should go and pick up the ordered
amount within 3 days after placing an order.
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7. “There is no other country like ours in the
whole wide world! This is an ultimate
free country”, thought Mr. Smarty. “Even
water we can order in the amount that
we really needed – no more, no less. Who
knows better than us the actual demand
for water? In our country there is no
pressure on individual.”
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8. Upon agreement with Mr.
Smarty’s thought, the State radio
“SHALALA” made a public
announcement:
Минск
“You are free to order NOW!”,
came a voice from radio – “Without a
piping system it will be much more
difficult for our neighboring country,
MALILA, to spy on us. Use your rights and
enjoy living in our beautiful country of
LALIMA!”
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9. Mr. Smarty was very optimistic. After all, he is
one of the best Purchasers in the Kingdom. The
King himself respected Mr. Smarty a lot. Now,
Mr. Smarty had a chance to improve his face
among neighbors and relatives. But most
importantly – to all his 3 wives – already for
years they were not happy with a husband that is
spending too much time at work. “I will prove to
all of them – I am a person to respect and honor”
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10. Mr. Smarty bought an old water
reservoir and installed on top of the
roof at his house.
“This volume should be enough for the
whole month!”, thought Mr. Smarty.
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11. Mr. Smarty graduated from Smart
University, Clever Faculty. So it
was not difficult for him to
calculate the necessary amount
of water needed. Mr. Smarty
calculated, and then placed an
order.
Within two days, Mr.
Smarty received all
the water he
ordered.
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12. To be continue....
Well, let’s have a break for a while
from the fairy tale.
Let’s show to Mr. Smarty how you can
order (or purchase) goods better than
him, if you know the history of real
consumption.
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13. Simulation No.1 (Beginner Level)
This is a task for beginners. If you think you have
more experience, please work on Simulation No. 2.
90
Product “LaLiMa”
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70
60
50
40
30
20
10
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45
Week
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14. Here is the situation:
I. The above graph shows the statistics
of yearly sales (for the last 45 weeks)
of product “LALIMA”.
II. Product is sold to retail shops.
III. You are in the beginning of week 46.
IV. Order Lead-time is 2 weeks (time from
placing an order till receiving goods)
V. The Producer (manufacturing plant) is
located in India.
VI. Current inventory in your warehouse
is 140 pcs.
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15. Here is your Task:
1. How much will you order?
2. When will be your next order and
how much?
3. Provide your formula for
calculations.
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16. Simulation No.2 (Advanced Level)
Here is the situation:
• Refer to the above graph. Graph shows statistics of
yearly sales of product “LALIMA” for the last 45
weeks.
• Product is sold to retail shops.
• You are in the beginning of week 46.
• Order Lead-time is 2 weeks (time from placing an
order till receiving goods).
• The Producer (manufacturing plant) is located in
India.
• Your current inventory in the warehouse is 140 pcs.
• You are preparing a Sales Campaign for this product
in 4-week time. Sales Campaign will start from
week 50.
• The duration for the Sales Campaign is 4 weeks
(week 50, 51, 52, and 53)
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17. Here is your Task:
1.Make a forecast on how much will be
the Sales during the Campaign.
2.Make a schedule for orders (when
should you place the order, and how
much is the order amount).
3.Calculate what is the amount of
inventory you want to hold a night
before the Campaign (at the end of
week 49).
4.Provide your formula for calculations.
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18. Please send your answers on Simulations (either one
or both) to darius.radkevicius@gig-europe.eu
We will summarize all answers and post them in the
next publication. The answers will be anonymous. This
will help you to compare your answers with others and
solve even more difficult Simulations.
On the next publication:
1. Analysis of Simulations No.1 and No.2.
2. … to be continue the LALIMA fairy tale.
3. New Simulations.
Please fill free to forward this article to your
colleagues, friends and business partners.
! Important)Note:)
The)fairy)tale)original)author)is)–)Rinardas)Goda))
This)article)authors)are:)Darius)Radkevicius,)Pauls)Irbins,)Yin)Li)Chua) 18
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19. You can order a book,
workshop, analysis or
lecture, or just a dream
at:
darius@versloknyguklubas.lt
+37069841027
 Darius
Radkevičius
Author of “God, Quantum physics,
Organizational structure and
Management style”
http://www.amazon.co.uk/Quantum-Physics-Organizational-
Structure-Management/dp/9955689234/ref=sr_1_1?
ie=UTF8&s=books&qid=1266446827&sr=1-1
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20. www.god-­‐physics-­‐management.com
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