Inventory Theory.S1 Inventory Models

9/9/01 Inventory Theory Inventory Theory.S1 Inventory Models This chapter will consider several model types. Supplement 2 describes deterministic models. Even though many features of an inventory system involve uncertainty of some kind, it is common to assume much simpler deterministic models for which solutions are found using calculus. Deterministic models also provide a base on which to incorporate assumptions concerning uncertainty. Supplement 3 adds a stochastic dimension to the model with random product demand. Supplement 4 begins discussion of stochastic inventory systems with the single period stochastic model. The model has applications for products for which the ordering process is nonrepeating. The remainder of the chapter considers models with an infinite time horizon and several assumptions regarding the costs of operation. Supplement.5 and .6 derive optimum solutions for the (s, S) policy under a variety of conditions. This policy places an order up to level S when the inventory level falls to the reorder point s. Supplement 7 extends these results to the (R, S) policy. In this case the inventory is observed periodically (with a time interval R), and is replenished to level S.