Inventory Control Guide Page 34
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404.6 Periodic Review Systems
With lot size - reorder point systems, an order is placed as soon as the inventory hits the order
point R. This implicitly assumes you review your inventory permanently.
Continuous Review
Inventory
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R
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By opposition, with periodic review you inspect and place orders at periodic instants.
Periodic: (Review time= 8, lead time= 5)
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8
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2
0
-2
Days
In this example, orders are placed at times: 0, 8, 16,24,32 and the corresponding deliveries
occur each time 5 days later, that is on day 5,13,21,29,and 37.
The inventory is controlled at time t= 0, 1Rt, 2Rt, ...
Such models are used in two cases. First, the physical control of the inventory could be so
expensive that the exact count is only performed, let us say, once a month. In this case, you
will also order once a month. In other cases, this is the administrative aspects that push you to
order only, let us say, in the evening.
Another situation is when the delivery occurs at periodic times. If the milkman comes only
twice a week, you will not order at any time but before or when he comes.
Prod 2100-2110
Inventory Control
33
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