PRESENTATION ON p and q system

FOR THE SUBJECT:-

SUPPLY CHAIN MANAGEMENT

Presented by: SUBHOJIT DUTTA (PG-11-42)
SUBMITTED TO PROF R.K.SINGAL
SUBHOJIT DUTTA

Economic Order Quantity (EOQ)/Q SYSTEM

Developed in 1915 by F.W. Harris Answers the question How much do I order? Used for independent demand items. Objective is to find order quantity (Q) that minimizes the total cost (TC) of managing inventory. Must be calculated separately for each SKU. Widely used.(i.e. works well in a lot of situations, even when its assumptions dont hold exactly).

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Continuous Review System

Relax assumption of constant demand. Demand is assumed to be random. Check inventory position each time there is a demand (i.e continuously). If inventory position drops below the reorder point, place an order for the EOQ. Also called fixed-order-quantity or Q system (the fixed order size is EOQ).

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A Continuous Review (Q) System

R = Reorder Point Q = Order Quantity L = Lead time

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Periodic Review (P) System

Periodic review (P) system: A system in which an items inventory position is reviewed periodically rather than continuously.
Sometimes called a fixed interval reorder system or a periodic reorder system. A new order is always placed at the end of each review, and the time between orders is fixed at P. Demand is a variable, so total demand between reviews varies. The lot size, Q, may change from one order to the next.
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A Water Tank Analogy for P system

Inventory Level Supply Rate

PERIODIC MONITORING PERIODIC MONITORING

Inventory Level

Demand Rate SUBHOJIT DUTTA

PERIODIC MONITORING

Periodic Review System (P)

Fixed interval reorder system or periodic reorder system

Four of the original EOQ assumptions maintained

No constraints are placed on lot size Holding and ordering costs Independent demand

Lead times are certain

Order is placed to bring the inventory position up to the target inventory level, T, when the predetermined time, P, has elapsed

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A Periodic Review (P) System

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Periodic Review System (1)

Instead of reviewing continuously, we review the inventory position at fixed intervals.(For example, the bread truck visits the grocery store on the same days every week). Inventory brought up to a target level Also known as P system, Fixed-order-interval system or Fixed-order-period system

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Periodic Review System

Has a target inventory rather than a reorder point. Does not have EOQ since quantity varies according to demand. The order interval is fixed, not the order quantity.

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Comparison of Q and P Systems

Convenient to administer Orders for multiple items from the same supplier may be combined Inventory Position (IP) only required at review
Systems in which inventory records are always current are called Perpetual Inventory Systems

P Systems

Q Systems Review frequencies can be tailored to each item Possible quantity discounts Lower, less-expensive safety stocks
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Inventory systems
Q-system
order QUANTITY is constant lower order limit signal size for the stock replenishment

P-system
order PERIOD is constant upper order limit missing quantity up to limit is ordered
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Using P and Q Systems in Practice

P may be easier to use since levels are reviewed less often. P requires more safety stock since may only order at fixed points. P is more likely to run out since cannot respond to increases in demand immediately Either may be more costly: P in safety stock, Q in monitoring cost.
SUBHOJIT DUTTA

SOURCES
Project report Journal: Business research Forrester Research 2011 KPMG-FICCI Report http://www.indiainbusiness.nic.in www.google.co.in www.google.com/inventory/management www.wikipedia.com
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SUBHOJIT DUTTA

FINALLY

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