AN INVENTORY MODEL

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DEFINITION• Mathematical equation or formula 

that helps a firm to determine the economic order quantity, and the frequency of ordering.• To keep goods or services flowing

to the customer without interruption or delay.

• S : Maximum number of stock• s : Minimum number of stock• If stock < s , restock. stock > s , no replenishment

How does it work?

nX

n

: The quantity on hand at the end of period n just prior to restocking.

: The quantity demanded in the nth period

0ka and

0

1k

ka

10 =

0 =

6 =

-1 =

2 =

FORMULA :

EXAMPLE

- THE END-