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Explain whether the continuous review or periodic review inventory system is likely to result in higher...

Explain whether the continuous review or periodic review inventory system is likely to result in higher safety stock. Which is likely to require more time and effort to administer? Why??

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Expert Solution

Continuous review system:

Periodic Review:

The safety stock is one with multiplication of 'z'

So, for Periodic review it is with Order Interval and Lead time addition.

Hence, in case of Variable demand, the safety stock will be higher in case of periodic review. But in case of variable demand and lead time, inventory will be higher for continuous review.

So, it depends on scenario and situation.

Continuous is likely to take more time and effort to administer as every day inventory needs to be cross checked against the desired level. In case of shortfall, new order is required to be placed. So, lot of time and energy required. In case of periodic review, it needs to be done once in a while and order placed as per requirement.

keosha answered 1 year ago
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