Analogy
means explaining a realistic subject matter with the help of artificial subject
matter. Here water-tank analogy actually shows the creation of inventory.
Figure shows the creation of an inventory with the help of a
water tank. First of all, there is an inward flow, that gets into the tank and
increases the level of inventory. The level decreases as there is demand and
also for the scrap flow. Which is why, it is very critical to have the right
level of inventory.
