All expenses related to inventory management comprise:

(1) Ordering costs. Ordering refers to the purchase or procurement of the plant's necessary goods,
and ordering costs include clerical and administrative work as well as the transportation of
orders, the processing of information, the delivery of ordered goods, and the wages of the
personnel who make the purchases.

(2) In the purchase model, the cost of material procurement is split into two categories: fixed
ordering costs and material purchase costs. Fixed ordering costs are those fees assessed for
requesting materials from the inventory system that is independent of the size of the order,
such as fax, phone, follow-up, etc. The quantity of each order and the product's unit pricing
determine how much material is purchased and how much is charged to the inventory system.

(3) It is important to remember that the transportation expenses for the requested materials and
the costs associated with the inspection are considered procurement costs.

(4) Holding costs are the expenses incurred because of keeping inventory in the inventory system.
The following categories apply to these costs: (a) The cost of store facilities, which includes the
annual rent of the store, water, electricity, gas charges, etc. (b) The cost of transfers, such as the
cost of moving items inside the store; (c) The cost of loss, which includes material decay or
breakage; (d) The cost of insurance and taxes; and (e) The cost of capital stock (time cost), which
represents the amount of missed profit opportunities.

(5) Holding cost is expressed as h = i*C, where coefficient I is the holding cost rate, which varies
annually between 0.15 and 0.25, and C is the product unit price. Each organization may also
have its own policies for estimating the holding cost of goods.
Total cost is equal to the sum of ordering and holding costs.
symbol Description
D Materials demand during a period
Co Fixed cost of each order during a period
Ch Holding cost of a unit of goods during the period
i Holding cost rate during the period
N Number of received orders during the period
Q Order quantity in each order
Q* Economic (optimal) order quantity
C The purchase cost of each goods unit
L Order delivery length
Length of each cycle or the time which lasts for the order to reach zero or interval
T between

System of continuous inventory review:

The inventory is studied at any time in this policy, and once the inventory is equal to or below the order
point, we order based on the optimal order quantity. In fact, inventory control is continuous; the
interval between two order points is not always equal, but the order quantity is.

Reordering point in the EOQ model: Reorder Point (ROP) has two states in this model:

EOQ model diagram with order quantity during the time and reordering point.
Storage and Reservoirs
The batching plant of a construction project was analyzed to determine the size and number of
reservoirs for storage and feeding of batching plant materials based on the results of the optimal order
quantity prediction. It had a time constraint. The arrival of sand, gravel, and cement for this project was
delayed by 12 hours. This project's batching plant was a dragline, and its mixer, a pan type, had a
production capacity of 35 m3 /hr.

This facility had three silos with capacities of 80, 80, and 170 tons. Its sand and gravel reservoirs had a
combined capacity of 1000 cubic meters. The plant's daily average demand rate for supplying the
requisite concrete was 450 m3 /hr. The ideal order quantity and reordering point were determined by
applying plant specifications in the neural network and fuzzy logic models. With these two parameters,
the near ideal number and size of these reservoirs could also be determined.