BUS606: Operations and Supply Chain Management

The aim of the study is to develop a methodical approach to calculating the parameters of the stochastic inventory management system in conditions of economically based shortage by means of statistical methods. In accordance with the stated aim, the following objectives of the study are defined: – to develop a procedure that would allow linking deterministic and stochastic conditions of the inventory control system, in particular, costs of shortage, the value of safety stock and order quantity; – to prove the expediency of the cost-effective level of inventory shortage and to associate it with the size of safety stock and other parameters of the inventory management system with a normal distribution of parameters; – on the basis of compromise between the levels of shortage, safety stock and client service to develop the method of calculating the parameters of the stochastic inventory management system, to estimate its sensitivity to input parameters.