Objective

Maximise Profits = Sum of Sales Qty (avg of historical sales) * (Selling Price - Cost) Objective function must link to the service level Think of how service level affects expected sales qty

Decision Variables

% Service Level for Each Product Number of Weeks to Order

Constraints Weekly cash on hand Weekly order cost capped at $1,500 Sum of order cost = $1,500 Space constraints Balance + Order qty =< Max bal qty of product Historical Bal Qty get from monthly data Order qty = k * min order qty where k = int & >=0 Balance + Order qty >= Min bal qty of product

Minimum order qty

Loss Leader

Flaws of Model -Does not cater to new products -Avoid roundup, if function