Operations Research, 2nd Edition

11

Inventory Models

11.1 INTRODUCTION

Inventory is defined as any idle resource of an enterprise. It is stock of goods, commodities or economic resources that are kept for the purpose of future business affairs. Inventory may be kept in any form—raw materials in process, finished product, packaging, spares and others—stocked in order to meet the expected demand. It is important to maintain some inventories for the smooth functioning of an enterprise. Suppose a firm is not maintaining inventories; if a sales order comes, it has to purchase the raw materials required, wait till these arrive and then start production. This increases the waiting time of customers to get the delivery goods.

The disadvantages of not maintaining inventories are: raw ...