Inventory and Stock Control

This chapter describes set of mathematical techniques that are of used by companies that have stock control issues to deal with. In a company, stock is in the form of raw materials, partially finished goods, completed goods or products awaiting shipment. The problem that the company has to deal with is to work out what is the level of stock that needs to be maintained to meet the anticipated demand without incurring unnecessary additional costs. In the economic order quantity model converts all the costs involved in stock control into a mathematical representation. In reality, the actual demand depends on some probabilistic distribution and is unlikely to be fixed unless there is an agreed supply contract in place. The reorder point depends upon the lead time (assumed fixed), the risk deemed acceptable of not meeting an order and the selected probabilistic demand function.