Probabilistic inventory models and an application in an industrial company

Inventories are held to meet some future demands, either from external customers or from internal users. In modern production systems, managers are closely interested in the inventories. A good number of companies are in critical conditions because of the wrong inventory policies and application errors. Inventory management has two major inputs. These are; demand forecasts for products and the prices of products. The deterministic models assist us in building complex simulation models of inventory systems; however, in many inventory cases demand is not known with a high degree of certainty. In this situation, a probabilistic inventory model should actually be used. Some inventory problems are characterized by a single order for the entire demand period. These are the single period inventory problems. The extensions of these models are multiple period inventory models that units left over from one period are available to meet demands in subsequent periods. Multiperiod inventory models which are stochastic generally classified as continous review or periodic review according to whether the current inventory level is being monitored continuously or periodically. In this study, continous review inventory model was used in the application stage. Key Words:. Inventory, inventory management, demand, probabilistic inventory model, continous review, periodic review.