 Now, students, we will be covering inventory management. So the logical flow would be that what we have covered right now is about vendor selection. So in vendor selection, we have looked at different models and techniques for, let's say, defining the cost and different type of costs that would actually affect the selection of that vendor. Now we will be looking at the inventory management or inventory planning. That would be the logical flow then. So first of all, there would be a vendor selection. Then we will be looking at the inventory planning. Now, first of all, we can refresh ourselves and whatever knowledge we have from our previous courses about inventory management or inventory planning. So inventory planning and control is one of the logical decisions that follow vendor selection. Once vendor and the total cost of orders are determined, then the next step would be to determine the economic order quantity. Yes, that would be true that we will be finding EOQ for those type of enterprises and those type of businesses in a supply chain where you would have some make to forecast kind of a scenario. So if we have a forecast available with us, then economies of scale would be the purpose or would be the objective to be achieved. So if you want to achieve economies of scale, then economic order quantity would be the basic model or some variant of it would be used by that business or enterprise. Now if the business falls in like assemble to order or something like make to order scenario, then of course economies of scale would not be the primary objective. The primary objective would be to respond to the customers. But what we will be discussing first of all would be based on the inventory planning techniques for the businesses which are for make to forecast scenario. So economic order quantity and the ordering frequency would be the purpose and we would be looking at some advanced models of EOQ. What we know about EOQ is that economic order quantity should be determined based on the total cost and service levels. Yes, there is a service level and that service level is actually dependent upon the number of orders or the amount of demand from originating from the customers which you are able to satisfy. So the objective of minimizing total inventory cost and maximizing service levels are actually conflicting in nature. So just remember one thing when you are saying that in economies of scale by achieving economies of scale or by using economic order quantity, what are you achieving? You are actually minimizing the total cost of inventory for that business and that total cost would basically be the essential components are the holding cost and the holding cost plus the carrying cost plus the cost of like setup or the ordering cost for the retailer. These two were the basic cost plus the material cost of course linear in nature. So if you can remember that economic order quantity, the basic model then you can add different cost to it which are particularly essential for your business like it could be the transportation cost, it could be the shortage cost or it could be some other penalty cost or it could be some damages cost to the inventory. So whatever that cost is essential for your business, you will be adding it into that cost function but essentially what would you do? You would minimize that cost function. So at one view we are saying that we want to minimize the cost and at the second we also say that we want to maximize the service levels. It's actually conflicting in nature because if service level is high, so traditionally service levels is about like satisfying the customer demand and demand of the customer is actually homogeneous. That is the assumption here. But remember that the customers are not heterogeneous or they show heterogeneity for some kind of a product and product is of such nature that it can have some differentiating features. So this is just true for them where there is a product of homogeneous nature. For example, I want to buy some pen, I want to buy some stationery, I want to buy let's say chicken. So that would be more or less like homogeneous. Differentiating features would not be there in the product and customers would look at it and they would actually get the same kind of a utility from that product. So, but if that is not the case, even for make to forecast kind of scenario, for example, still in home appliances, still in electronic products, still for most of the computers, most of the electronic appliances, we still have a forecast, but still there are features that differentiate that product from the competitor's product. So there simultaneously if you want to minimize the total cost of inventory and maximize the service levels, it would be conflicting in nature. So maximization of service levels relates to provide a variety of items and ensuring their availability at all times and at all places. So for make to forecast products, traditional perfect EDLP products, those products which do not have differentiating features, the product should be available at the right time at the right place. That would be the objective of the function in the right quantity of course, but not necessarily the variety of the product matter because product is actually homogeneous in nature. But if still in the regime of make to forecast, you have a product that has differentiating features like computers to some extent which are like make to forecast, you have cars. So automobiles, you have home appliances. So they are like most of the time, their repeated models are make to forecast, you have previous history with you, you can forecast it. But at the same time, the service levels would be actually determined by the variety of product at the right place at the right time in the right quantity. So this requires maintaining a large inventory of multiple items at several locations because you have some variety of items. There are some differentiating features. I can buy a split AC which is like with inverter or without inverter or I can buy an AC which has like gold foil in it. So there are some differentiating features in those type of products which are actually produced on make to forecast scenario. So what you need to do, you need to actually put lot of inventory at different locations close to the consumer. Hence an economic trade off is needed between inventory cost and service levels. So that is not the case. So here what happens if I am looking at the variety of product and the availability of that product at the right time at the right place in the right quantity, I am actually sacrificing the inventory cost. My inventory cost would not be at the minimum, it is actually at the higher level. So what is that? There is a trade off between the service levels and the inventory cost. So inventory actually helps to achieve economies of scale in production, average or unit production or purchase cost decrease with larger order size owing to economies of scale resulting from the fixed cost of order ordering and setup. So the objective here would be inventory. If you look at inventory, so in a supply chain what would we do? We actually look at the production system. We try to minimize the inventory cost there. So at the production you will try and you will look at the upstream player as well like the purchase of that raw material should be at the minimum cost. Of course now we know that you have selected a vendor on different criteria and on the basis of that now for an EDLP product or make to forecast product the primary criteria would be cost and there would be some other criteria related to it. But the objective would be that basically you want to minimize the ordering or setup cost. You want to minimize the holding cost for that inventory. Thank you.