The fixed-time period inventory system has a smaller average inventory than the fixed-order-quantity system because it must also protect against stock outs during the review period when inventory is checked.

Question

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The fixed-time period inventory system often results in a larger average inventory than the fixed-order-quantity system because it reviews inventory at fixed intervals and must account for the maximum expected demand during the review period plus the lead time to replenish, leading to potentially higher safety stock levels to protect against stockouts.

The Fixed-Time Period Inventory System Has a Smaller Average Inventory