This research was conducted to solve the problem of inventory management for the packages limited of Pakistan. The company’s aim was to find a methodology by which the raw material inventory could be kept at an optimal level. In particular, it was desired to minimize the average stock level, and minimize the likelihood of stock outs. Both, a high stock level as well as the situation of a stock out are undesirable because the have their own implications, and ultimately lead to higher production costs. The problem was solved by developing a simulation model. This model had the capability to predict the future stock levels on the basis of a variable demand rate, and a variable lead time. The inputs for the model were determined by analyzing the past data of the company, and by consulting the specialists. The model was then used to test various scenarios, in which various levels of the controllable inputs like the order point etc were tried. Finally, an optimal policy was determined for the company. This Inventory Simulation Model is so flexible that can apply on the products by just changing the input for the product which is under consideration. Among several products of Packages Ltd, PVC Film is the product which is selected, for building, verifying, and validating the simulation model. Result revealed in the model most closely related to the actual industry requirement, and those results were highly significant for Packages Ltd.