Page 121 - DMGT525_MATERIALS_MANAGEMENT

Materials Management

Notes
Figure 8.2: P-System – Fixed Order Period System (Review Period = 6 months)
ROP = 1100

1100

1000
800 OQ = 600 OQ = 500 OQ = 500
INVENTORY HOLDING 600 SAFETY STOCK

400

200

L
L
0 2 2 4 6 8 10 12 14 MONTHS
R = 6 Months
R = 6

Source: Uddin. Jahir (2010). “Materials Management”. Excel Books Pvt. Ltd.

P-System. In Figure 8.2, the Replenishment level is equal to 1100, the review period is 6 months
and the Lead time is 3 months. The starting Inventory is 500. Hence, an order of size of 600 (1100
– 500) is placed. As consumption goes on, Inventory level depletes. After 3 months, the Order
quantity arrives, raising the Inventory levels to 800. The next review period comes in the sixth
month. At this point, the Inventory on hand and on order is equal to 600. Hence, next order of
size equal to 500 (1100 – 600) is placed and the process continues.
The differences between Q-System and P-System are shown in Table 8.3.

Table 8.3: Differences between Q-System and P-System

Factors Q-System P-System
Order quantity Constant Variable
When to place order When inventory becomes equal When review period comes
to reorder level
Record keeping Each time a withdrawal/ Carried out only at review
addition is made period
Size of inventory Less than P-System
Effort/Time to maintain More than P-System due to
continuous monitoring
Types of items covered under High priced, critical and Items not considered in Q-
the system important items System

Source: Uddin. Jahir (2010). “Materials Management”. Excel Books Pvt. Ltd.

Self Assessment

Fill in the blanks:

12. Fixed order period model is also known as……………… .

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