Model 1: Purchasing model with no shortages: (Wilson's model) The following assumptions are made in … 2. Inventory model is a mathematical model that helps business in determining the optimum level of inventories that should be maintained in a production process, managing frequency of ordering, deciding on quantity of goods or raw materials to be stored, tracking flow of supply of raw materials and goods to provide uninterrupted service to customers without any delay in delivery. Material theory (or more formally the mathematical theory of inventory and production) is the sub-specialty within operations research and operations management that is concerned with the design of production/inventory systems to minimize costs: it studies the decisions faced by firms and the military in connection with manufacturing, warehousing, supply chains, spare part allocation and so on and provides the mathematical foundation for logistics. The demand for the product may be deterministic or stochastic; it may completely predictable, or predictable up to some Even when inventory models are restricted to a single product the number of possible models is enormous, due to the various assumptions made about the key variables: demand, costs, and the physical nature of the system. That the firm knows with certainty how much items of particular inventories will be used or demanded for within a specific period of time. That the use of inventories or sales made by the firm remains constant or unchanged throughout the period. Inventory can be defined as the stock of goods, commodities or other resources that are stored at any given period for future production. The first one is the well-known Wilson's inventory model. 3. The inventory control problem is the problem faced by a firm … Like other economic models, EOQ Model is also based on certain assumptions: 1.