Periodic Review System
Periodic Review System is an inventory control method where stock levels are reviewed at fixed, predetermined time intervals and replenishment is ordered to restore inventory position to a preset target level. The review interval remains constant, but the order quantity varies with actual demand and current on-hand stock, usually expressed as Q = T - I.
On a typical manufacturing shop floor, periodic review is used for raw materials, packaging, and MRO items that don't justify real-time tracking. Buyers or material planners check the storage location at a fixed cadence—daily, weekly, or biweekly—and release one order that brings the inventory position up to the target level. That target is built from expected demand over the review period plus supplier lead time, plus safety stock for variability. In practice, planners aggregate consumption from issue tickets or scanner data, subtract on-hand and on-order quantities, then order only the difference. This approach naturally aligns with cycle counts and Kanban-lite replenishment, and it consolidates purchases so the team avoids frequent small POs and can match receipts to the production schedule. As the review interval lengthens, the protection interval expands and safety stock must rise; shortening the interval increases order frequency but reduces stockout exposure.
- Recurring stockouts before review day: a review interval longer than actual consumption volatility tolerates lets demand deplete stock before the next check and before lead-time coverage is restored, forcing line stoppages, expedited freight, and missed build schedules.
- Hidden overstock and shortages from ordering floor bins only: ignoring on-order, backorders, or allocated stock while ordering leads to double-ordering or under-ordering, creating overstock, hidden shortages, and receiving congestion.
- Chronic shortages on critical SKUs: using a nominal supplier promise instead of actual elapsed replenishment time, or underestimating demand variability, sets safety stock and target levels too low, causing recurring stockouts and emergency replenishments.
When is periodic review preferable to continuous review?
Periodic review is preferable for many items, moderate-to-low value SKUs, manual counting constraints, or when inventory can only be measured periodically rather than in real time.
What is the difference between the P-system, (R,S), and (R,s,S)?
In a basic periodic review or P-system, stock is reviewed every fixed period and ordered up to a target level. In (R,S), inventory is reviewed every R time units and replenished up to S. In (R,s,S), an order is placed only when the inventory position falls to or below s, and the order raises it to S.
What inventory position should be used at review?
The correct measure is inventory position: on-hand inventory plus on-order inventory minus backorders and allocations. Periodic review decisions must reflect what will actually be available before the next review cycle.