Certified Supply Chain Professional (CSCP) Practice Exam

What characterizes a periodic review system in inventory management?

1. Reordering is based on a fixed schedule

2. Reordering is based on real-time inventory levels

3. Orders are placed only when demand is high

4. Maximum inventory levels are strictly controlled

The correct answer is: Reordering is based on a fixed schedule

A periodic review system in inventory management is characterized by reordering based on a fixed schedule. This means that inventory levels are evaluated at regular intervals, such as weekly or monthly, rather than continuously. At each scheduled review, the inventory position is assessed, and an order is placed if the inventory level falls below a predetermined threshold. This approach allows businesses to maintain stock levels without needing to monitor inventory continuously, facilitating better planning and management of replenishment cycles. In contrast, reordering based on real-time inventory levels pertains more to continuous review systems, which constantly track inventory quantities and trigger orders as soon as stock reaches a certain minimum level. Orders being placed only when demand is high suggests a reactive strategy rather than the proactive approach found in periodic systems, where the schedule dictates when reviews occur. Lastly, maximum inventory levels being strictly controlled relates to specific inventory control practices, which may be part of both periodic and continuous systems, but is not a defining feature of a periodic review system itself.