Under a periodic review system, enough inventory must be carried to protect against stockout for the replenishment lead time plus the review period.

Question

Quizplus · Accepted Answer

This statement is true for a periodic review system. The review period is the length of time between inventory reviews, during which inventory levels are monitored and replenishment orders are placed. In a periodic review system, safety stock is calculated to cover the expected demand during both the lead time (i.e. the time it takes to receive a replenishment order) and the review period. This ensures that enough inventory is on-hand to prevent stockouts during the entire replenishment cycle.

Under a Periodic Review System, Enough Inventory Must Be Carried