PERPETUAL vs.

PERIODIC SYSTEM

FEATURE PERPETUAL SYSTEM PERIODIC SYSTEM

 Record keeping  Perpetual; counted each time an addition or  Periodic; counted only at review period;
withdrawal is made; involves “loose monitoring” of
involves “close monitoring” of inventory inventory
 Resources required to maintain  More, since perpetual record keeping

 Size of inventory
 Type of inventory items
 Less than that of the periodic system.
 For higher-priced, critical or important
items.
 More than that of the perpetual system,
since safety stock is added to avoid
stockouts in between review periods.

Inventory System Inventory Model Inventory Decision Formula

 Perpetual  Fixed – Order Quantity or
Economic Order Quantity
(EOQ) model
 Periodic  Fixed – Time Period or
Fixed – Order Interval
model
 How much to order? 2 DS 2 DS
EOQ = constant; the same EOQ  
H iC
quantity ordered each time.
 When to order?
Order is placed when the R  dL
quantity on hand drops to
the reorder level (R).
 How much to order?
q = variable; the order q  d T  L  SS  I
quantity varies each time
SS  z d T  L
an order is placed.
I  on hand  on order  backorder
 When to order?
Order is placed when the
review period (T) arrives.