How would you design a continuous review system

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Reference no: EM132144882

The SCO Company sells desks that have a demand of 4 units per month and cost $25 each, the annual carrying charge is 30 percent of the product value, and it costs $15 to place an order. The company is considering installing either a Q or a P system for inventory management. The standard deviation of demand has been 4 units per month, and the replenishment lead time is two months, a 90 percent service level is desired. For Parts a and b below, specify the two key decisions under each inventory management system, and describe the implementation of the respective system (e.g., the description of a EOQ system with reorder point R and order quantity Q will be: When the inventory level drops to the reorder point level R, then a new order of size Q will be placed). You can round your calculations to 3 decimal places.

a) How would you design a continuous review system?

b) How would you design a periodic review system?

c) What are the pros and cons of using the periodic system compared with using the continuous review system for this product?

Reference no: EM132144882

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