DETERMINISTIC INVENTORY MODEL AND ITS APPLICATION TO MOUKA FOAM INDUSTRY.
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DETERMINISTIC INVENTORY MODEL AND ITS APPLICATION TO MOUKA FOAM INDUSTRY.
Chapter 1: Introduction: An Overview of Inventory Theory.
It is common practice in most manufacturing processes, production systems, the financial services industry, the economy, and agriculture to keep products and services on hand for later sale or consumption. Stockpiling is the activity of stockpiling items for future use or sale.
It is a well-known trait among merchants, distributors, and manufacturing organisations. It is likely that the hotel manager will always ensure that a sufficient supply of meat and fish is kept in the freezer for use whenever guests come.
Inventory theory is thus focused with mathematical and analytic tools that aid in the decision-making process of when and how much to replenish the available stock of commodities.
In small businesses, the manager can maintain track of inventory and make judgements. However, while this may not be realistic even in small businesses, many companies have saved a significant amount of money by implementing scientific inventory management. Specifically, scientific inventory management includes:
Create a mathematical model that describes the behaviour of the inventory system.
Determine the appropriate inventory policy based on the model.
Frequently utilise a computer system to keep track of inventory levels and determine when and how much to restock.
Maintaining an optimal inventory policy is a crucial factor in management policy decisions in many real-world corporate settings today. This is due to the considerable impact on the organisation that a loss of goodwill caused by a poor inventory policy could have in terms of decreased patronage, revenue, and customer loyalty.
The study of inventory allows us to create an optimal inventory policy that specifies
The quantity of goods ordered or manufactured.
The time difference between one order and the next.
Total minimum inventory cost.
The model formulation and optimal inventory policy are done in such a way that (1) and (2) above provide us the lowest inventory cost, resulting in higher net income.
1.1 Deterministic Inventory Models.
There are various models for inventory difficulties. The nature of demand and the lead time, or the period between placing an order and receiving it, dictate the type of model and its mathematical formulation.
These sorts of inventory models are concerned with inventory problems in which the actual future demand is considered to be known; we will assume that the lead time for these models is instantaneous, i.e. when an order is placed, it is delivered instantly. However, demand is typically classified into two types:
Random demand, which occurs more frequently in actual circumstances. Demand in this scenario is uncertain, but its behaviour can be compared to a certain pattern known as probability distributions such as normal, binomial, and so on. Stochastic inventory models are those that operate under the assumption that demand will vary randomly.
Constant or known demand.
1.2 PURPOSE OF THE STUDY
Most commercial organisations have the challenge of determining an adequate quantity of raw material and other goods stockpiles. To address this issue, management should apply inventory theory methodologies. This study aims to discover the optimal quantity of an item for each order.
When should orders be placed?
What amount of the item, if any, should be kept on hand as safety stock in case demand fluctuates?
How many items should be backlogged, and how much shortage should be allowed?
Should management take advantage of the discount offer?
1.3 SCOPE OF THE STUDY.
Inventory theory is a broad topic of operations research that has found significant and prominent applications in a variety of domains, particularly research into stochastic inventory models.
This work, however, is focused with deterministic inventory models and how they might be applied to the problem of optimal stock keeping policy.
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