question:

12.9 model

1. In pp. 514-515 please read the section about Fixed-period (P) systems and explain its principle by drawing figure 12.9 and elaborating the model concept of working. Fixed-Period (P) Systems Fixed-quantity (C) system An ordering system with the same order amount each time. Perpetual Inventory system A system that keeps track of each withdrawal or addition to inven tory continuously, so records are always current Feed-period (P) system Asytem in which inventory orders we made at regular time intervals 02 The inventory models that we have considered so far are fixed-quantity, or 0. systems. That is, the same fixed amount is added to inventory every time an order for an item is placed. We saw that orders are event triggered. When inventory decreases to the reorder point (ROP), a new order for Q units is placed. To use the fixed-quantity model, inventory must be continuously monitored. This requires a perpetual inventory system. Every time an item is added to or withdrawn from inventory, records must be updated to determine whether the ROP has been reached. In a fixed period system (also called luperiodic review, or Psystem), on the other hand, inventory is ordered at the end of a given period. Then, and only then, is on-hand inventory counted. Only the amount necessary to bring total inventory up to a prespecified target level (T) is ordered. Figure 12.9 illustrates this concept. Fixed-period systems have several of Target quantity (7) the same assumptions as the basic EOQ fixed-quantity system: The only relevant costs are the ordering and holding costs. 0 Lead times are known and constant. Items are independent of one another The downward-sloped lines in Figure 12.9 again represent on-hand inventory levels. But now, when the time between orders (P) passes, we place an order to raise Time inventory up to the target quantity (7) Figure 12.9 Inventory Level in a Fixed-Period (P) System Various amounts (0.0, 0, ette ordered at regular time intervals based on the quantity necessary to bring inventory up to the target cury (1) Q: On-hand inventory -P