Question 6
Suppose, you are responsible for material purchase in an organization. You have demand forecast of a product for next four weeks which are 3, 4, 2 and 4 units respectively. You need to purchase one type of raw material to produce the final product to meet the above demand. Consider, one unit of the final product requires one unit of this raw material. Whenever an order is placed, your organization needs to incur a cost of $4 irrespective of the quantity ordered. Purchasing cost of the raw material is $2 per unit. Holding cost of an item not gone for production at the end of a week is $0.5 per week. You can order a maximum of 5 units in a week and the warehouse has capacity to store upto 4 units of inventory in a week. Note that you need to meet the demand in every week.
Solve the above problem using dynamic programming ( backward recursion) and answer the given sub-questions for this problem.
What does the action set represents?
How many units of the raw material needs to be purchased in a week
Ending inventory with the warehouse in each week
Beginning inventory with the warehouse in each week