Characteristics Of Inventory Management Problems
The main difference between them is when an order is placed for fixed quantity model same quantity is ordered and for fixed time period model the orders are placed at fixed time intervals. Fixed time period model is used when orders have to be placed at fixed time intervals such as weekly, biweekly, or monthly. This system requires periodic checks of inventory levels and is used by many retail firms such as drug stores and small grocery stores. Fixed quantity model the same quantity is ordered every time an order is placed. A school might also use a fixed-order quantity when it is captive to packaging situations. If a teacher were to walk into an office supply store and ask to buy 22 paper clips, but they only come in 100 paper clips per pack. You were captive to the packaging requirements of paper clips. It works the same way for other purchasing situations. A supplier may package their goods in certain quantities so that their customers must buy that quantity or a multiple of that quantity.
The major difference between fixed quantities and fixed time period systems is in the timing and the quantities of the orders that are placed. With fixed order quantity system, two variables define the system and answer two basic questions of when to order and how much to order. Inventory is checked on a continuous basis and the system is prepared to place orders at various times. With fixed time period system quantity ordered varies based upon the inventory position when the system is checked. This system requires carrying more safety stock inventory. When I worked at Walmart we used the fixed order quantity system and inventory was always ordered based on demand. As customers would by products, a system would compile the information and an order would be placed automatically.