Course code Course Name L-T-P -Credits Year of

Introduction
IE463 INVENTORY CONTROL 3-0-0-3 2016
Prerequisite: Nil
Course Objectives
 To impart the essential elements of inventory control and the relevant costs of
inventory.
 To make aware the different aspects of a good inventory control system.
 To enrich the understanding the basic as well as the advanced topics in inventory
control under different system characteristics
 To introduce the decision making situations in inventory systems under different
control policies.
Syllabus
Concepts of inventory, Inventory Costs, Types of Inventory systems, Economic Order Quantity
(EOQ), Inventory systems with back orders, Inventory systems with planned back orders and
constrained stock outs, Inventory systems with finite production rate, Inventory systems with
quantity discounts, Time varying demand, Dynamic economic lot size model, Uncertainties in
production-inventory systems, managing uncertainties: forecasting, Methods of forecasting,
Methods of forecasting demand with trend and seasonality, Safety stock, Design problems of
inventory systems based on service levels, Stochastic demand system for one item with constant
lead time: policy evaluation for Poisson demand, News vendor problem, General (r, q) policies,
Lumpy demand, Several items with stochastic demand, Stochastic lead time demand model, Lead
time demand distributions, Advances in production-inventory control systems: order-up-to (OUT)
policies and variants, Generalized OUT in discrete and continuous domains, Concepts of
inventory system stability, Design problems in OUT models.
Expected outcome
After completing the course, the students will be able to:
i. know the essential elements of inventory control and the relevant costs of inventory.
ii. possess the understanding of the different aspects of a good inventory control system.
iii. possess sound knowledge in basic as well as the advanced topics in inventory control
under different system characteristics such as the lead time, demand, etc.
iv. know the decision making situations in inventory systems under different control
policies.

Text Book:
 Paul H. Zipkin, “Foundations of Inventory Management”, McGraw-Hill, Singapore, 2000.

References:
1. Sven Axsäter, Kluwer , “Inventory Control”, Academic Publishers, Boston, 2004.
2. Silver, Pyke & Peterson “Inventory Management and Production Planning and
Scheduling”, John Willey & Sons.
3. W. J. Hopp and M. L. Spearman , “Factory Physics”, , McGraw-Hill, Singapore, 2000.
4. Arnoldo C. Hax and Dan Candea , “Production and Inventory Management”, Prentice-Hall
Inc., New Jersey, 1984.
 Course Plan
End Sem.
Module Contents Hours Exam
Marks
Concepts of Inventory:
Elements of inventory systems, importance and functions of
inventory control, concept of relevant costs, different costs of
inventory, comparison of inventory costs and simple problems
in relevant costs, production system components and
functions, inventory control in production systems, make-to-
I 8 15%
order and make-to-stock systems. Types of inventory systems:
periodic and continuous systems. One item with constant
demand rate. Economic order quantity (EOQ) model of
inventory: motivation, the model, assumptions, performance
criteria, optimal policy, sensitivity analysis.

Inventory Systems:
Inventory systems with back orders, performance criteria,
optimal policy, and sensitivity analysis. Planned back orders
and constrained stock outs, costs of back order systems and
II 6 15%
stock out costs. Systems with finite production rate: optimal
policy. Quantity discounts, imperfect quality, perishable
products, present value criterion.

FIRST INTERNAL EXAMINATION

Time Varying Demand:
Time varying demands. Extreme cases, dynamic economic lot
size model, model formulation, Wagner-Whitin procedure,
III 8 15%
modeling and implementation issues, discounted costs,
continuously accumulating costs, limited capacity, back orders,
quantity discounts, linear decision rule.
Uncertainties in production-inventory systems:
Managing uncertainties: forecasting, methods of forecasting,
forecasting models, with trend and seasonality, concepts of
IV 6 15%
service levels, different service level measures, design
problems of inventory systems based on service levels. Safety
stock for fast-moving and slow-moving items.
SECOND INTERNAL EXAMINATION
Stochastic demand system:
One item with constant lead time: demand models, policy
evaluation for Poisson demand, base stock policies,
performance evaluation, news vendor problem, solution and
interpretations, back orders and waiting times, world-driven
demand, approximations, base stock policies with different
V 7 20%
approximations, general (r, q) policies, optimization modeling
of continuous and discrete approximations. Lumpy demand,
expected present value criterion, optimization. Several items
with stochastic demands: base stock policies, general (r, q)
policies, series systems, echelon based calculations, base stock
policy optimization, different demand supply systems.
 Stochastic lead times and advances in production-inventory
system:
Model structure, taxonomy, independent stochastic lead times
with different demand processes, limited capacity supply
systems, flexible capacity, lost sales, exogenous sequential
VI 7 20%
supply systems, lead time demand distributions.
Advances in production-inventory control systems: order-up-to
(OUT) policies and variants, generalized OUT in discrete and
continuous domains. Concepts of inventory system stability,
design problems in OUT models.
END SEMESTER EXAM

End Semester Examination Question Paper Pattern:

Examination duration: 3 hours Maximum Marks: 100

Part A (Modules I and II):

Candidates have to answer any 2 questions from a choice of 3 questions. Each full question
carries a total of 15 marks and can have a maximum of 4 sub questions (a, b, c, d). No two
questions shall be exclusively from a single module. All three questions shall preferably have
components from both modules. Marks for each question/sub question shall be clearly
specified. Total percentage of marks for the two modules put together as specified in the
curriculum shall be adhered to for all combinations of any two questions.

Part B (Modules III and IV):

(Same as for part A marks)

Part C (Modules V and VI):

(Same as for part A, except that each full question carries 20 marks)

Note: If use of tables and charts are permitted for the university examination for this course,
proper direction of the same should be provided on the facing sheet of the question paper.