Continuous review

What is a continuous review?

Continuous review involves monitoring inventory levels continuously and placing orders when inventory levels reach a predetermined reorder point. The reorder point is typically set at a level that is sufficient to cover the expected demand during the lead time for the item, plus a safety stock to account for demand variability and uncertainty in lead times. As a result, inventory levels are reviewed and orders are placed on a continuous basis, based on the current inventory levels and expected demand.

Continuous review is frequently used for high-value items or items with high demand variability, as it ensures that inventory levels are always maintained at a certain level to avoid stockouts.

What is the difference between continuous and periodic review?

The main difference between the two review types is the frequency of inventory review and ordering. Continuous review involves continuous monitoring of inventory levels and ordering when inventory levels reach a reorder point, while periodic review involves reviewing inventory levels and placing orders at fixed intervals based.

The choice between these two depends on factors such as the demand variability, lead time, and value of the items, as well as the resources and capacity of the organization.