Inventory models

Abstract

Inventories are held and updated for various reasons. Every organisation is expected to hold stocks of some kind. As most of these stocks are expensive and need careful management, a question that arises is: Why do organisations hold stocks? The cost of holding inventories is justified by the benefits obtained, which may include cheaper purchase prices, avoidance of stock outs, smoothing of operations and lower control costs. Organisations hold stock in order to allow for variations and uncertainty in supply and demand. As all organisations, from the largest to the very smallest, hold stocks, problems in inventory control are almost universal. Holding stocks can be very expensive and therefore it followed that organisations have put a considerable amount of effort into minimising costs while maintaining a good standard of service offered to their customers. The aim of this dissertation is to determine effective answers to questions such as: When should an order be placed? How much should be ordered? These questions are answered through the use of inventory cost models which are dealt with and analysed in Chapters 2 and 3. Chapter 4 being the practical part of this dissertation consists of a case study. The data needed in order to be able to use these models in a practical way was obtained from the Governmental Pharmaceutical Services. In this case study various models which were studied in the previous chapters were implemented in Matlab R11 Version 5 and the results achieved were interpreted.