2. Independent Demand Inventory Types Cycle Stock Safety Stock Anticipation Pipeline

3. Periodic Review Systems Time On-hand inventory PP T

4. Periodic Review Systems Time On-hand inventory PP T Q1Q1 Order placed

5. Periodic Review Systems Time On-hand inventory PP T Q1Q1 L Order placed

6. Periodic Review Systems Time On-hand inventory PP T Q1Q1 L Order placed Order received

7. Periodic Review Systems Time On-hand inventory Order received Order received Order placed Order placed Q1Q1 Q2Q2 Q3Q3 LLL PP T

8. Periodic Review Systems Time On-hand inventory IP 1 IP 3 IP 2 Order received Order received IP OH Order placed Order placed Q1Q1 Q2Q2 Q3Q3 LLL PP Protection interval T

9. Periodic Review Systems Time On-hand inventory IP 1 IP 3 IP 2 Order received Order received IP OH Order placed Order placed Q1Q1 Q2Q2 Q3Q3 LLL PP Protection interval T Q t = T - IP t IP = OH + SR - BO T = 400BO = 5 OH = 0SR = 0 Q = 400 - (-5) = 405

10. Periodic Review Systems Time On-hand inventory IP 1 IP 3 IP 2 Order received Order received IP OH Order placed Order placed Q1Q1 Q2Q2 Q3Q3 LLL PP Protection interval T Q t = T - IP t IP = OH + SR - BO T = 400BO = 5 OH = 0SR = 0 Q = 400 - (-5) = 405 T = Average demand during protection interval + z  P+L  t = 15 units L = 3 weeks cycle/service level = 80%

11. Periodic Review Systems Time On-hand inventory IP 1 IP 3 IP 2 Order received Order received IP OH Order placed Order placed Q1Q1 Q2Q2 Q3Q3 LLL PP Protection interval T Q t = T - IP t IP = OH + SR - BO T = 400BO = 5 OH = 0SR = 0 Q = 400 - (-5) = 405 T = Average demand during protection interval + z  P+L D = (40 units/week)(52 weeks) = 2080 units  t = 15 units L = 3 weeks cycle/service level = 80% P = = 10 weeks EOQ D  P+L = 15 13 = 54 units

12. Periodic Review Systems Time On-hand inventory IP 1 IP 3 IP 2 Order received Order received IP OH Order placed Order placed Q1Q1 Q2Q2 Q3Q3 LLL PP Protection interval T Q t = T - IP t IP = OH + SR - BO T = 400BO = 5 OH = 0SR = 0 Q = 400 - (-5) = 405 T = Average demand during protection interval + z  P+L D = (40 units/week)(52 weeks) = 2080 units  t = 15 units L = 3 weeks cycle/service level = 80% P = = 10 weeks EOQ D  P+L = 15 13 = 54 units T = (40 units/week)(13 weeks) + 0.84(54 units) = 565 units

13. Periodic Review Systems Time On-hand inventory IP 1 IP 3 IP 2 Order received Order received IP OH Order placed Order placed Q1Q1 Q2Q2 Q3Q3 LLL PP Protection interval T

14. Comparison of Continuous (Q, R) and Periodic (T, P) Inventory Systems Continuous Review Fixed lot sizes lower safety stock Periodic Review orders placed at fixed intervals can combine multiple items inventory only needs to be known when order is due

15. Dano’s Drugstore