Inventory Modeling

Course Overview

Supply chains have simultaneously become increasingly globalized and lean. As a result, costs have often decreased dramatically, but at the expense of increased complexity and risk. Excellent inventory management and control are critical to effective management of supply chains. Managers need to understand the optimal amount of inventory to hold in stable situations, as well as in highly dynamic and uncertain environments. The tendency is often to hold too much inventory, and thus to avoid stock outs and the resulting fallout that lands on inventory managers. Companies, however, are also confronted with the cost of inventory in the form of reduced working capital that could be used for other profitable activities such as new product innovation or paying down debt. How should managers handle this tradeoff.

Course Objectives

1. Formulate a mathematical model describing the behavior of the inventory system.

2. Seek an optimal inventory policy with respect to this model.

3. Use a computerized information processing system to maintain a record of the current inventory levels.

4. Using this record of current inventory levels, apply the optimal inventory policy to signal when and how much to replenish inventory.

Course Content

Components Of Inventory Models

  • The cost of ordering
  • The holding cost
  • The shortage cost
  • The salvage value
  • The discount rate
  • The Lead Time

Deterministic Continuous-Review Models

  • The Basic EOQ Model
  • The EOQ Model with Planned Shortages
  • The EOQ Model with Quantity Discounts
  • Material requirements planning
  • Just In Time

A Deterministic Periodic-Review Model

A Stochastic Continuous-Review Model

A Stochastic Single-Period Model For Perishable Products

  • The Model with Initial Stock Level
  • A Single-Period Model with a Setup Cost

Stochastic Periodic-Review Models

  • Multiperiod Model with No Setup Cost
  • A Multiperiod Model with Batch Orders and No Setup Cost.

Larger Inventory Systems In Practice

  • Multiproduct Inventory Systems
  • Multi-echelon Inventory Systems

Course Methodology

The training is going to be highly interactive combination of lectures, group discussions, questionnaires, individual reflections, role plays, simulations and videos.

Target Audience

Managers, assitant managers and supervisors from inventory function.


2 days (08:30–14:30) with appropriate breaks for tea/refreshments and lunch.

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