Inventory Management

Content

Objective

Inventory management aims to determine the appropriate decisions regarding when and how much to order by taking into consideration the customer service level and cost criteria. A successful inventory management avoids the excess or insufficient inventory, which provides cost savings and increase in customer satisfaction. This elective course focuses mainly on the use of quantitative approaches in determining the optimal inventory policies. The course objectives are the following:
1. Make students be aware of the reasons for holding stock as well as the costs associated with it,
2. Show students how to make a quantitative analysis of inventory problems,
3. Inform students about the variety of stock models and the availability of the alternative solution techniques.

Course Content

Week 1. Introduction to Inventory Management : Motivation for Holding Inventories, Relevant Costs in Inventory Management, Characteristics of Inventory Models

Week 2. Deterministic and Stationary demand, Single Product Case: Basic EOQ and EPQ Models, Sensitivity Analysis Regarding These Models

Week 3. Deterministic and Stationary Demand, Single Product Case (Cont.): EOQ Model with Positive Lead Time and Quantity Discounts

Week 4. Deterministic and Stationary Demand, Multiple Products Case: Evaluation of EOQ-related Ordering Strategies for Multiple Products

Week 5. Deterministic and Dynamic Demand: Aggregate Planning Problem- Linear Programming Formulation and a Numerical Application with What’s Best and Excel Solver

Week 6. Deterministic and Dynamic Demand (Cont.): Dynamic Lot-Size Problem – A Dynamic Programming Algorithm

Week 7. Deterministic and Dynamic Demand (Cont.): Dynamic lot-size problem – Wagner-Whitin algorithm and Silver Meal heuristic

Week 8. Introducing Stochastic Inventory Models : Reasons for Holding Safety Inventory, Various Product Availability Measures, Categorization of Inventory Policies for Uncertain Environment

Week 9. Midterm exam

Week 10. Evaluating Product Availability Levels Given an Ordering Policy, Evaluating Safety Inventory or Reorder Point Given Desired Level of Product Availability

Week 11. Evaluating Effects of Uncertainty in Supplier Lead Time and Product Aggregation on Safety Inventory

Week 12. Newsboy Model and Its extensions

Week 13. Periodic-review Stochastic Inventory Models: Evaluating a given policy using Markov Process

Week 14. Periodic-review Stochastic Inventory Models (Cont.): Finding Optimal Inventory Policy using Markov Decision Process

Course Learning Outcomes

A student who passes this course successfully will be able to:

1. Explain the reasons for holding stock and costs asociated with it,
2. Categorize the inventory models,
3. Apply quantitative techniques to find the best inventory policy in case of deterministic stationary or dynamic demand,
4. Define various periodic-review and continuous-review inventory policies,
5. Determine the safety stock and product availability level in the existence of stochastic demand,
6. Apply quantitative methods to determine the optimal inventory policy for stochastic demand case,
7. Solve the newsboy model and its extensions
8. Do a Markov process analysis of periodic-review stochastic inventory systems

References

Nahmias, S., “Production and Operations Analysis”, 6th edition, McGraw-Hill Companies, 2008.

Chopra, S., Meindl, P., “Supply Chain Management: Strategy, Planning, and Operation”, 4th edition, Prentice Hall, 2010.

Weekly Contents