INVENTORY MANAGEMENT PROBLEM

INVENTORY MANAGEMENT PROBLEM:
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According to Kostas , the inventory problem involves the formulation of decision rules that
answer two important questions;
a. When is it necessary to place an order (or set up for production) to replenish
inventory?
b. How much is to be ordered (or produced) for each replenishment?
According to him, the decision rules must aim at satisfying anticipated demand at minimum
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cost or maximum profit. HadIey and Whitin , reasoned along the same line. To them, “the
two fundamental questions that must be answered in controlling the inventory of any physicalgood are when to replenish the inventory and how much to order for replenishment”.
Essentially every decision which is made in controlling inventories in any organization
regardless of how complicated the inventory supply may be, is in one way or another
associated with the question of when to order and how much to order