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Introduction Development of Inventory Management Theory During the 20th century there have been a number of milestones in the development of the theory of inventory management. In the early part of the century the economic order quantity (EOQ) was the main driver of inventory practices. A balance had to be struck between the costs of frequent re-ordering and expense of holding stock. Efficiency could be achieved by adhering to the EOQ principle. It provided the rational for centralised stock holding. In practice, it was incorporated into the re-order level or two-bin system of stock control. Where replenishment orders of the EOQ were placed whenever stock levels fell to a pre set re-order level. This level was set such that just enough stock was held to cover the lead time for delivery. One of the main problems with this system was that variable demand could lead to an erratic pattern of re-ordering,...

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