The application of dynamic programming model in the solution of inventory problems

Companies have to make a profit in order to serve society better and to survive fiercely competitive conditions. They need to use their resources efficiently to maximise their profits. A great number of techniques related to operations research can be employed to reach optimum results through using resources efficiently. Dynamic programming is one of these techniques and many company related problems can be solved by using it. Dynamic programming can be applied if the problems can be changed into ones including fewer variables. Dynamic programming has dynamic characteristic since it reaches optimum results by breaking down the long term into short terms. Therefore, dynamic programming is a model that can be used in inventory control which is an important problem for companies. Companies keep materials, unfinished and finished products in their inventories to be used in production or to sell them in the future. There are a great number of techniques such as Just-in-Time (JIT) and Material Requirement Planning (MRP). Companies want to either not keep inventories or to keep less inventories in order to escape heavy inventory cost. On the other hand, many companies keep inventories for reasons such as economic instability and being ready for changing demand conditions. The inventories kept by the companies must be stored somewhere. The main purpose is to determine under which conditions, how much, where and when they need to be stored. It is important to keep inventories with less cost and deprivation, and using less space. Dynamic programming is one of the important techniques to be used to solve the problems which can be defined as inventory problems. Conducted research has identified that dynamic programming is a very important model in determining the production inventory plan.