An inventory system is a set of policies and controls that monitors levels of inventory and determines what levels should be maintained, when stock should be replenished, and how large orders should be.
The fixed-time period inventory system has a smaller average inventory than the fixed-order quantity system because it must also protect against stockouts during the review period when inventory is checked.
The fixed-order quantity inventory model is more appropriate for important items such as critical repair parts because there is closer monitoring and therefore quicker response to a potential stockout.
The computation of a firm's inventory position is found by taking the inventory on hand and adding it to the on-order inventory, and then subtracting back-ordered inventory.