Fundamentals of Supply Chain Theory, 2nd Edition

Chapter 3 Deterministic Inventory Models

3.1 Introduction to Inventory Modeling

3.1.1 Why Hold Inventory?

Think about some of the products you bought the last time you went to the grocery store. How much of each did you buy? Why did you choose these quantities?

Here are some possible reasons:

1. You bought a gallon of milk but only a pint of cream because you drink much more milk than cream in a week.
2. You bought a six‐pack of soda, rather than a single bottle, because you don't want to have to go to the store every time you want to drink a bottle of soda.
3. You bought a “family size” box of cereal, rather than a small box, because larger boxes are more cost‐effective (cheaper per ounce) than smaller ones.
4. Although you usually eat one bag of potato chips per week, you bought three bags in case your hungry friends show up unexpectedly one night this week.
5. You asked the store to special‐order your favorite brand of gourmet mustard (which it doesn't normally stock), even though you already have a half jar at home, because you know it will take a few weeks before the mustard is delivered.
6. Although it would be more cost‐effective and convenient to buy 12 rolls of paper towels, you only bought 3, because you don't have enough space to store 12 rolls at home.
7. You bought four boxes of pasta, even though you only eat one box per week, because they were on sale for a greatly reduced price.
8. Even though grapes were on sale, you bought one pound instead of two because you knew the second ...