Introduction A inventory may be defined as an idle resources

Last updated: 10/10/2023

Introduction A inventory may be defined as an idle resources that possesses economic value It is an item stored or reserved for meeting future demand Such items may be materials machines many or even human resources Reasons for holding storks The main reasons are 1 To ensure sufficient goods one are available to meet anticipated demands 2 To absorb variations in demand and production 3 To prove a buffer between production processor 4 To take advantage of bulk purchasing discounts 5 To meet possible shortages in the future 6 To enable produces process to flow smoothly and efficiently 7 As deliberate investment policy particularly in times of inflation or possible shortages The Objective of Inventory Control The objective of inventory control is to maintain stock levels so that the combined costs mentioned earlier are at amenities This is done by establishing two sectors how to order When to order Inventory control terminologies 1 Demand The amount of quantity required by sales or products usually expressed as the rate of demand for week or month or year etc 2 Economic order quantity EOQ This is a calculated ordering quantity which minimized the balance between inventory holding costs and re order costs 3 Lead time The period of time between ordering and replenishment 4 Butter stock or safety stock It is a stock allowance to cover errors in forecasting the lead time on the demand during the lead time 54 5 Maximum stock A stock level as the maximum desirable which is used as an indicator 6 Reorder level The level of stock of which culture replacement order should be placed The re order level 9 independent upon the lead time and the demand upon the lead time and the demand during the lead time Types of Inventory Models There are two types of models can be used for inventory control They are i deterministic model ii stochastic model