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The '''inventory control problem''' is the problem faced by a firm that must decide how much to order in each time period to meet demand for its products. The problem can be modeled using mathematical techniques of [[optimal control]], [[dynamic programming]] and [[flow network|network optimization]]. The study of such models is part of [[inventory theory]].
==Reasons to keep low inventory levels==
According to Malakooti (2013) <ref>{{cite book|last1=Malakooti|first1=Behnam|title=Operations and Production Systems with Multiple Objectives|publisher=John Wiley & Sons|isbn=978-1-118-58537-5}}</ref> reasons to keep low inventory levels are:
# Obsolescence Due to advances in technology and changes in product design, parts procured for future use may become obsolete, leading to a substantial loss. Also, in food-related industries, outdated food products must be thrown away, leading to a waste of resources.
# Capital Investment Inventory ties up a substantial capital of the company and may not allow the company to be agile in response to market fluctuations. Space Usage Inventory occupies precious usable space that may be essential for other purposes. Also the space is usually costly to maintain.
# Complicated Inventory Control Systems A higher number of inventory items complicates the control and monitoring, such as identifying where items are and how many items exist. The JIT philosophy (discussed in Chapter 5) advocates the smallest possible inventory level, which is based on relying on reliable suppliers for effective JIT delivery of needed raw materials and inventory items.
==Concepts==
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