This survey deals with the reappraisal and analysis of the literature and surveies relevant to take stock direction techniques that the research workers will be utilizing in the optimisation. It consists of information culled from surveies and literature. both local and foreign. from which this survey is capable to. This chapter will surely assist in giving the reader a better apprehension of what is Economic Order Quantity theoretical account and Dynamic Programming to optimisation of the stock list system.

Definition: Inventory
Inventory refers to any sort of resources holding economic value and is maintained to carry through the present and future demands of theconsumers. It is a physical stock of points that concern or production endeavor keeps in manus for efficient running of personal businesss or its production. Inventory is the measure of goods. natural stuffs or other resources that are idle at any given point of clip. Inventory control is the agencies by which stuffs of the right measure and quality is made available as a when required with due respect to economic system in storage and ordination costs and working capital. It is besides defined as the systematic location. storage and recording of goods in such a manner that desired grade of service can be made to the operating stores at a minimal ultimate cost” ( S. C sharma ( 1999 ) . P. 509. 512 ) .

Inventory theoretical account: Economic Order Quantityand Dynamic Programming

For over a century. the literature embracing 100s of books and diaries has included frequent Hagiographas of direction scientists using quantitative methods to assist stock list directors make two critical determinations: how much stock list to order. and when to order it.

Inventory direction started every bit early as the beginning of the twentieth century when F. W. Harris originally developed the batch size expression or the EOQ theoretical account in 1915. R. H. Wilson independently developed the same expression in 1918. Apparently. Wilson popularized the theoretical account so the EOQ theoretical account is besides referred to as the Wilson EOQ theoretical account.

The EOQ expression has been independently discovered many times in the last 80 old ages. It is simplistic and uses several unrealistic premises. In Cargal discussed the basic EOQ theoretical account ; he said that they can non find what measure of an point to order when telling supplies. Despite the many more sophisticated expression and algorithm available. some big corporations still use the EOQ expression. In general. big corporations that use the EOQ expression do non desire the populace or rivals to cognize they use something so unworldly.

The variables. graph. and the expression was besides discussed in this paper. The authoritative EOQ theoretical account has been straight used in pattern but which. more significantly. represents the cardinal foundation of determination regulations covering with more complicated fortunes. Different fluctuations and applications of the EOQ theoretical account in production and stock list operations were expanded over the old ages such as covering with the measure price reductions. shelf-life considerations. replenishment lead clip and restraints on the refilling. Further promotions in stock list direction took topographic point when dynamic scheduling was used. with R. Bellman as its initiation male parent. However. earlier plants in DP were produced by Arrow. Karlin and Scarf.

Bellman. who popularized DP. used the stochastic theoretical accounts for the stock list direction jobs. But in 1958. Wagner and Within started with a deterministic theoretical account. referred to as the Wagner-Within method. with known demands in each period. and fluctuating costs from one period to the following. A few old ages subsequently. consequences for the stochastic theoretical account were established by Iglehart and Wagner with Veinott. which involves a demand with a uninterrupted distribution.

Inventory theoretical accounts have been applied and adapted by organisations. Silver enumerated the extended research and application done over the old ages. In retail stock list direction. retail mercantile establishments are progressively following equipment that permits gaining control of demand informations and updating of stock list records at the point of sale. In incorporate logistics. a really complex system. it utilizes operations stock list direction where care. transit and/or production are involved. In interactions with selling. stock list direction is applied on how to routinely take history of the effects of promotional activities on the control of stock lists. how to foretell and account for the effects of the system on the demand form. and the allotment of the shelf infinite in mercantile establishments such as supermarkets.

Stock on Inventory
The American Institute of Accountants defined the term stock list as “the sum of those points of touchable belongings which ( 1 ) are held for sale in the ordinary class of concern. ( 2 ) are in procedure of production for such sale or ( 3 ) are to be available for ‘sale’ . In Nigeria. stock list is normally referred to as stock-in-trade or work-in-progress. Stock may dwell of ( I ) Raw stuffs and supplies to be consumed in production ( two ) work-in-progress. or partially manufactured goods. ( two ) Finished stock or goods ready for sale. Stockss are valued in a basically different manner from fixed assets ; the latter are normally valued at cost less accrued depreciation. No method of stock rating is suited for all types of concern in all fortunes. Stock is valued at cost less any portion of cost. which needs to be written off when cyberspace realizable value or the replacing monetary value is lower than cost.

The Functions of Inventory
Inventories perform a figure of critical maps in the operations of a system. which in bend makes them critical to the production sector as good. Without stock lists. organisations could non trust to accomplish smooth production flow. obtain sensible use of machines and sensible handling cost or expects to give sensible service to clients. The basic map of stock lists whether they are natural stuffs. work-in-progress or finished goods are that of uncoupling the operations involved in change overing inputs into end products.

This allows the consecutive phases in the buying. fabrication and distribution procedure to run trust on the agenda of end product. of anterior activities in the production procedure. Furthermore. the uncoupling map allows both clip and spacial separation between production and ingestion of merchandises in the operating system. Last. stock lists can besides be used for other intents apart from the uncoupling maps. For illustration. when stock lists are displayed. they serve as promotional investing. Natural stuffs and finished stock lists are often accumulated to lodge against monetary value rises. rising prices and work stoppages.

Inventories besides serve to smooth out abnormalities in supply. In kernel. stock lists act to uncouple organisational activities. thereby accomplishing lower costs of operations. Inventories act to cut down procurance costs. and stock lists act to supply good client service and smooth production flow by supplying erstwhile bringing and avoiding dearly-won stock deficits. Inventories ordered in big measures can ensue in lower cargo charges and monetary value price reductions. On the other manus. stock list requires binding up capital that would otherwise be invested elsewhere.

Inventory besides requires dearly-won storage infinite ; and such costs as insurance. spoilage obsolesce. pilferage and revenue enhancements must be incurred as a consequence of keeping stock list. Hence. there is an appropriate chance cost associated with their value. It is hence. the responsibility of the direction to seek determination regulations that will really equilibrate these contentions of costs for a given system. It is in response to this direction pursuit for counsel in managing stock list determination state of affairss that a figure of techniques ( theoretical accounts ) have been developed to function as assistance to direction in accomplishing optimum stock list solutions.

Inventory Cost
The aims of stuffs direction are to minimise stock list investings and to maximise client service. It is a program to see that. the ends can be inconsistent or even indirect conflicts the function of the stuffs direction is therefore to equilibrate the aim in relation to the bing conditions and environmental restrictions. The basic object of stock list direction is to maximise client service through keeping appropriate sum of stock list with minimal possible cost. Inventory costs are costs associated with the operation of an stock list system. Thus the relevant costs included stock list are the undermentioned:

The purchase cost ( P ) The purchase costs of an point are the unit purchase it is obtained from an external beginning or the unit production costs it is produced internally. For the purchase points it is the purchase costless modified for different measure degrees fabricating points the unit cost include direct labor or company operating expense. Ordering or set up cost ( C ) This is the cost of puting an order. This cost straight with the figure of order or apparatus placed and non at all weigh the size of the order. The telling cost included doing analyzing stuffs inspecting stuffs follows up orders and making the processing necessary to finish the dealing. Transporting costs or keeping costs ( H ) There are costs of points ( stock lists ) in storage.

These costs vary with the degree of stock list and on occasion with the length of point an point is held. The greater the degree of stock list overtime. the higher the lovingness cost caring dramatis personaes can be included the costs of losing the usage of financess field up in stock list like storages dramatis personaes such as rent of constructing heating chilling compensating security. record maintaining. deprecation obsolescence. merchandise impairment etc. Stock out cost ( shortage cost ) This is the cost as a consequence of non holding points in storage.

This can convey loses of good will gain loss of incur back order cost and hold in the client service. Establishing the right measure to order from sellers or the size of tonss submitted to the houses productive installations involves a hunt for the minimal entire cost ensuing from the combined effects of fewer single costs keeping costs. apparatus costs telling costs and storage costs ( Tersine. R. J. 1994. PP. 13-15 )

Inventory Costing Method
There are three methods of stock list bing method. These are: First – in First – out ( FIFO ) This method is based on the premise that costs should be computed out in the order in which incurred. Inventory is therefore stated in footings of recent costs. Last – in First – out ( LIFO ) is a method based on the premise that goods should be charged out the latest cost be the latest cost be the first that are charge out. Inventories are therefore stated in footings of earliest cost. Leaden mean method is a method based on the premise that goods should be charged out at an mean cost such mean being influenced by the figure of unites acquired at the monetary value. Inventories are stated at the same leaden norm cost.