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Inventory Management and Risk Pooling - Single stage inventory - Multiple order opportunities

4 important questions on Inventory Management and Risk Pooling - Single stage inventory - Multiple order opportunities

Why does the distributor hold inventory? Name three reasons.

To satisfy demand occurring during lead time
To protect against uncertainty in demand
To balance annual inventory holding costs and annual fixed order costs

Which two types of policies for managing inventory effectively exist?

Continuous review policy
Periodic review policy

What is continuous review policy?

In this policy is inventory reviewed continuously, and an order is placed when the inventory reaches a particular level, or reorder point. This type of policy is most appropriate when inventory can be continuously reviewed.

What is periodic review policy?

In this policy is the inventory level reviewed at regular intervals and an appropriate quantity is ordered after each review. This type of policy is most appropriate for systems in which it is impossible or inconvenient to frequently review inventory and place orders if necessary.

The question on the page originate from the summary of the following study material:

Designing and Managing the Supply Chain | 9780071270977 | David Simchi Levi

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