A Review of Alternative Approaches to Inventory Theory

A survey of the general field of inventory theory, summarizing past work and highlighting important unsolved problems. The Memorandum does not review actual techniques of inventory management used by commercial or military organizations, but restricts itself to inventory theory — i.e., the analysis of problems associated with the control of stocks of physical goods at one or more locations and under various conditions. The survey: (1) reviews the structure of inventory systems in terms of spatial configuration of stocking points, types of control methods, characteristics of items, and nature of stochastic processes; (2) considers basic questions of when and how much to order under a variety of assumptions for any particular item (both steady-state and dynamic models); (3) examines simulation as a tool for studying inventory systems; (4) explains the heuristic-intuitive approach; (5) discusses important theoretical problems; and (6) examines difficulties of application.