What are the advantages and disadvantages of using the Periodic Review Inventory control system

January 14th, 2012 Comments off
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  ADVANTAGES DISADVANTAGES
1 All stock items are reviewed periodically so that there is likely to be less obsolete stocks 1 In general larger stocks are required, as re-order quantities must take account of the period between reviews as well as lead times
2 Economies in placing orders may be gained by spreading the purchased office load more evenly 2 Re-order quantities are not at optimum level of a correctly calculated EOQ
3 Larger quantity discounts may be obtained when a range of stock items are ordered at the same time from a supplier 3 Less responsive to changes in consumption. If the rate of usage change shortly after a review, a stock-out may well occur before the next review
4 Because orders will always be in the same sequence, there may be production economies due to more efficient production planning being possible and lower set up costs. 4 Unless demands are reasonably consistent, it is difficult to set appropriate periods for review.

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