Inventory management

The purpose of inventory theory is to
determine rules that management can
use to minimize the costs associated with
maintaining inventory and meeting
customer demand. Inventory is studied in
order to help companies save large
amounts of money.
Inventory theory deals with the
management of stock levels of goods,
with the intent of effectively meeting
demands for those goods. ... From time to
time, the inventory manager may choose
to place an order for additional quantities
of the good to replenish the stock on hand.
What is inventory management model?
Inventory management models
are methods of optimizing the flow of
goods in and out of an organization. Each
business is special, thus they should be
adaptable with how they approach their
stock administration.

Inventory model is a mathematical model

Example: Inventory is replenished at every
that helps business in determining the
regular interval of 5 days. The maximum
optimum level of inventories that should
allowable inventory is 800 Units. The
be maintained in a production process,
inventory reviewed on Day-5, Day-10, Day -
managing frequency of ordering, deciding
15 and Day -20 were 387 Units, 201 Units,
on quantity of goods or raw materials to
498 Units and 127 Units respectively.
be stored, tracking flow of supply of raw
Order Quantity (O) = (M) – (It).
materials and goods to provide ...