Modeling and Solving Inventory Control Problems Essay

Due to customer needs for stylish forms, new modern designs, special packaging or better product production, changes in the business environment influence engineering and logistic relations between companies and suppliers. IT technology plays a big part in solving issues concerning the process. Inventory control became today’s vital problem in management supplier demands. The aim of the article is to determine a supplier-stocking–producing policy that will make cost optimal stockpiling possible for an optimal length producing time horizon. The stochastic newsvendor model is a mathematical model in operations management and applied economics used to determine optimal inventory levels. A decision maker needs to decide how many units of limited-useful life products to order for a single selling period because the aim is to have an optimal-length producing time horizon. The optimal solution seen is characterized by a balance between the expected costs of shortage and surplu s. According to seasonality analysis, demands for products change greatly in a certain period, therefore run-out problem of nowadays has a great importance. By improving the models that is highly related in solving the problem, they optimized the cost function of the parameter, which does not remove the possibility of back-order and is applicable for an optimal time horizon. The handling of product run-out problems was solved by the developed model which arises from the seasonality of the real demand. By using the developed classical newsvendor model, the minimal number of required production cycles can be determined in a specific production time horizon as well as the optimal quantity that needs to be manufactured in the cycle. It is different with other models such as probabilistic model, economic batch quantity model, quantity discount model because it gets the optimal inventory level in its optimal length period.