What is inventory?

The term inventory is referred to a stock which is an idle resource and has some monetary cost. Such stock can be the raw
materials, work-in-process goods and completely finished goods that are considered to be a part of business resources. Such
resources are ready or will be ready for sale or resale. .
Example: If a newspaper vendor uses a vehicle to deliver newspapers to the customers, only the newspaper will be considered
inventory.

Kind of inventory company has:

1) Raw materials are unprocessed materials used to produce a good. Examples of raw materials include:
o Aluminum and steel for the manufacture of cars
o Flour for bakeries that produce bread
o Crude oil held by refineries
2) Work-in-progress inventory is the partially finished goods waiting for completion and resale. WIP inventory is also known
as inventory on the production floor. A half-assembled airliner or a partially completed yacht is often considered to be
work-in-process inventory.
3) Finished goods: Finished goods are products that go through the production process, and are completed and ready for
sale. Retailers typically refer to this inventory as merchandise. Common examples of merchandise include electronics,
clothes, and cars held by retailers.
4) Safety Stock and Anticipation Stock: Safety stock is the extra inventory a company buys and stores to cover unexpected
events. Safety stock has carrying costs, but it supports customer satisfaction. Similarly, anticipation stock comprises of raw
materials or finished items that a business purchases based on sales and production trends. If a raw material’s price is rising
or peak sales time is approaching, a business may purchase safety stock.
 Inventory management:
Inventory management, a critical element of the supply chain, is the tracking of inventory from manufacturers to warehouses and
from these facilities to a point of sale. The goal of inventory management is to have the right products in the right place at the right
time. This requires inventory visibility — knowing when to order, how much to order and where to store stock.

 Basic steps of inventory management

1. Purchasing inventory: Ready-to-sell goods are purchased and delivered to the warehouse or directly to the point of sale.
2. Storing inventory: Inventory is stored until needed. Goods or materials are transferred across your fulfillment network until ready for
shipment.
3. Profiting from inventory: The amount of product for sale is controlled. Finished goods are pulled to fulfill orders. Products are
shipped to customers.

 Objective of inventory system

 To maintain inventory of raw material at sufficiently high level to perform production and sales activities smoothly.
 To minimize investment in inventory at minimum level to maximize productivity.
 To curtail the possibility of interference in the production schedule.
 To minimize the holding cost and time.
 To ensure that finished goods are available for delivery to customers to fulfill orders, to smoothen the operation and to provide
efficient customer service.  To protect the inventories against deterioration.
Preliminary concept
 Inventory modelling: inventory modelling is the Mathematical model helps business in determining the optimum level of
inventories that should be maintained that minimizes the inventory cost in business and maximum profit.

 Demand: It is the consumer’s desire and ability to purchase a goods or service.

 Deterioration: Deterioration is the process decaying of items that are stored for long time

 Shortages: Shortages is the condition in inventory management where quantity of demanded items is greater than quantity
of items supplied.

 Holding cost : holding cost is refers to cost of holding of storages in inventory.

 Ordering cost : ordering cost refers to expenses of company to purchases an item.

 Production rate : production rate refers to amount of time is taken to produced

 Fuzzy :The term fuzzy means vague or difficult to perceive

Fuzzy logic : fuzzy logic is technique of representing and manipulating uncertain information ,approach to variable
processing that allow for multiple possible truth values to be processed through same variable.

Ex: It will rain tomorrow

Fuzzy number: A fuzzy number is a special form of fuzzy set on the set of real number.

Triangular fuzzy number: triangular fuzzy number are used to represent uncertain and incomplete information in decision
making.
 Inflation: The cost related to the system of inventory is assumed to be constant with respect to time. It is assumed that there
is no effect of inflation of the system of inventory. With an increase in the rate of inflation the monetary conditions in
various countries have witnessed a drastic change. These days inflation is an unavoidable condition in the system of
inventory. The future cost of the inventory changes with the effect of inflation. Inflation has a significant role in the
production management as well as the system of inventory as the decision makers find it challenging to arrive at final
decision in such a situation.