In this modern and competitive world, one of the major problems of every company is that of cost control and reduction. Inventory management is used as a scientific device for controlling inventory cost and eliminating waste and is regarded as an integral part of industrial management. While other methods of cost control have to encounter resistance or reluctance of workers, inventory management can secure rich dividends much easily and without inviting any resistance. In the present study, inventory data of raw materials has been collected and a stochastic analytical inventory model has been proposed for economic selection of inventory control factors and elimination of shortages of raw materials. As determined by this proposed model, the total inventory cost has been less than the existing inventory cost. The result of the study shows that companies can save considerable amount of money per annum by adopting this model.

In an organization, there are thousands of items listed as inventory stock. To have a better control on the items, different inventory policies are applied. Inventory is the stock of physical goods held at a specific location at a specific time (Seetharama et at., 2003). It is an idle resource held for further use (Dilworth, 1993). Inventories are needed in smooth and efficient running of enterprises. Raw material inventory helps the organization to earn discount and save money being paid in piecemeal purchasing. When there is no supply of raw materials from the market due to shortage or any failure, inventories help in carrying on the production activity uninterrupted. (Khanna, 1997).

One of the problems in inventory control is to decide the degree of control which is required over various inventory items. It is a known fact that a big percentage of investment in inventory is concentrated on relatively few high value items. Large savings in inventory investments are possible, if attention is paid to inventory items in proportion to their value. The following measures are needed to reduce inventory.

Inventory Control Policies, Industrial Management, Analytical Inventory Model, Theory of Constraints, TOC, Quality Management System, QMS, Operational Research, Integrated Manufacturing System, Production Planning, Inventory Control.