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MM/U4 Topic 6 Q-System and P-System of Inventory management

Continuous Review System (Q)

A continuous review (Q) system or reorder point (ROP) system or fixed order-quantity system tracks the remaining inventory of an item each time a withdrawal is made to determine whether it is time to reorder.

  • In practice, these reviews are done frequently (e.g. daily) and often continuously (after each withdrawal).
  • At each review a decision is made about an item’s inventory position.
  • If it is considered to be too low, the system triggers a new order.

A system where the stock level of each product is calculated each time a product is moves in or moves out the systems in real-time. This triggers an order for more stock when the inventory level falls below a particular re-order point

 A system where the stock level of each product is calculated each time a product is moved in or moves out the systems in real-time, triggering an order for more stock when the inventory level falls below a particular re-order point

 A system where the stock level of each product is calculated each time a product is moved in or moves out the systems in real-time, triggering an order for more stock when the inventory level falls below a particular re-order point.

Examples

A simple example of a continuous inventory system is a ledger-style checkbook that many of us use on a daily basis. Our checkbook comes with 300 checks; after the 200th check has been used (and there are 100 left), there is an order form for a new batch of checks. This form, when turned in at the bank, initiates an order for a new batch of 300 checks. Many office inventory systems use reorder cards that are placed within stacks of stationery or at the bottom of a case of pens or paper clips to signal when a new order should be placed. If you look behind the items on a hanging rack in a Kmart store, there will be a card indicating it is time to place an order for the item for an amount indicated on the card.

A more sophisticated example of a continuous inventory system is the computerized checkout system with a laser scanner used by many supermarkets and retail stores. The laser scanner reads the universal product code (UPC), or bar code, from the product package; the transaction is instantly recorded, and the inventory level updated. Such a system is not only quick and accurate, it also provides management with continuously updated information on the status of inventory levels. Many manufacturing companies’ suppliers and distributors also use bar code systems and handheld laser scanners to inventory materials, supplies, equipment, in-process parts, and finished goods.

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Periodic Review System (P)

With the periodic review system, you determine the quantity of an item your company has on hand at specified, fixed-time intervals (such as every Friday or the last day of every month). You place an order for an amount (Q) equal to the target inventory level (TI), minus the quantity on hand (OH), similar to the min-max system. The difference is that with the periodic review system, the time between orders is constant (such as every hour, every day, every week, or every month) with varying quantities ordered. The min-max system varies both the time between orders and the quantities ordered.

  • A classic inventory system where the inventory level is reviewed at a regular time intervals (e.g., once a week), whereupon the decision is made as to how much to order to bring the inventory level up to a given amount.
  • A typical inventory system where the inventory level is reviewed at a regular time intervals (e.g., once a week), after that the decision is made as to how much to order to bring the inventory level up to a given amount. Learn more in: Discrete Event Simulation in Inventory Management.
  • A typical inventory system where the inventory level is reviewed at a regular time intervals (e.g., once a week), after that the decision is made as to how much to order to bring the inventory level up to a given amount. Learn more in: Discrete Event Simulation in Inventory Management

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