Each perpetual inventory model—re-order point systems, perpetual

inventory, and periodic review—has its own set of advantages and

disadvantages. Let's break them down:

1. Re-order Point Systems:

Advantages:

- Simple to implement and understand: Re-order point systems are straightforward, making them easy
for small businesses or those with limited resources.

- Helps in maintaining optimal inventory levels: By setting a re-order point, businesses can ensure that
they replenish stock when it reaches a predetermined level, minimizing the risk of stockouts.

- Efficient for managing fast-moving items: Ideal for products with consistent demand patterns, as it
allows for automatic replenishment when inventory levels drop.

Disadvantages:

- Doesn't account for variable demand: Re-order point systems may lead to stockouts or excess
inventory if demand fluctuates unexpectedly.

- Ignores lead time variability: Doesn't consider variations in lead time, which can lead to stockouts if
lead times increase unexpectedly.

- Limited in managing slow-moving items: Less effective for products with irregular demand patterns or
those with long lead times.

2. Perpetual Inventory:

Advantages:

- Real-time tracking: Provides continuous monitoring of inventory levels, allowing for immediate
adjustments and better control over stock levels.

- Accurate inventory valuation: Helps in maintaining accurate financial records by continuously

updating inventory levels, which is crucial for financial reporting and decision-making.

- Effective for high-value items: Particularly useful for expensive items where accurate tracking and
control are essential to minimize losses.

Disadvantages:
 - Requires significant resources: Implementing perpetual inventory systems often involves investing in
technology and training to maintain accurate records, which can be costly for small businesses.

- Susceptible to errors: Relies heavily on accurate data entry and can be prone to errors if there are
discrepancies between recorded and actual inventory levels.

- May not be suitable for all businesses: Perpetual inventory systems are most beneficial for businesses
with high inventory turnover and stable demand patterns.

3. Periodic Review:

Advantages:

- Simplifies inventory management: Involves reviewing inventory levels at specific intervals, making it
easier to implement and manage for businesses with limited resources or expertise.

- Cost-effective: Requires fewer resources compared to perpetual inventory systems, making it more
suitable for small businesses or those with low inventory turnover.

- Flexible: Allows for adjustments based on changing demand patterns or business needs by adjusting
review periods as necessary.

Disadvantages:

- Limited visibility: Inventory levels are only reviewed periodically, which can lead to stockouts or excess
inventory if demand fluctuates between reviews.

- Delayed response to stockouts: Since inventory levels are only assessed periodically, stockouts may
occur before they are identified and addressed.

- Inaccurate inventory valuation: May lead to discrepancies between recorded and actual inventory
levels, affecting financial reporting and decision-making.

Saigon Coop Mart should apply the perpetual inventory method,

specifically the re-order point system, for perishable products.

Perishable products have a limited shelf life and require careful monitoring to avoid waste and spoilage.
Implementing a re-order point system for perishable items would ensure that Saigon Coop Mart
maintains optimal inventory levels to meet customer demand while minimizing the risk of overstocking
and waste.

Here's why the re-order point system is well-suited for perishable products:
1. **Real-time monitoring**: Perishable products require continuous monitoring of inventory levels to
ensure freshness and minimize waste. A re-order point system allows for real-time tracking, enabling
Saigon Coop Mart to quickly replenish stock as it depletes, thereby reducing the likelihood of stockouts
or excess inventory.

2. **Optimal inventory management**: By setting a re-order point based on anticipated demand and
lead time, Saigon Coop Mart can maintain the right amount of inventory to meet customer needs
without excessive overstocking. This helps in reducing the risk of perishable items reaching their
expiration dates before being sold.

3. **Minimizing waste**: Perishable products are particularly sensitive to fluctuations in demand and
can quickly become unsellable if not managed properly. The re-order point system ensures that
inventory levels are replenished in a timely manner, minimizing the risk of spoilage and waste.

While expensive products and hi-tech items may also benefit from perpetual inventory methods due to
their value and potential for loss, perishable products have the added urgency of a limited shelf life,
making them a priority for real-time inventory monitoring and management.