PRESENTATION ON p and q systemFOR THE SUBJECT:- SUPPLY CHAIN MANAGEMENT Presented by: SUBHOJIT DUTTA (PG-11-42) SUBMITTED TO PROF R.K.SINGAL SUBHOJIT DUTTA Objective is to find order quantity (Q) that minimizes the total cost (TC) of managing inventory. works well in a lot of situations. SUBHOJIT DUTTA . even when its assumptions don’t hold exactly). Harris Answers the question ‘How much do I order?’ Used for independent demand items.Economic Order Quantity (EOQ)/Q SYSTEM • • • • Developed in 1915 by F.W. • Must be calculated separately for each SKU.(i. • Widely used.e. SUBHOJIT DUTTA . • If inventory position drops below the reorder point. • Check inventory position each time there is a demand (i. place an order for the EOQ.Continuous Review System • Relax assumption of constant demand.e continuously). Demand is assumed to be random. • Also called fixed-order-quantity or Q system (the fixed order size is EOQ). A Continuous Review (Q) System R = Reorder Point Q = Order Quantity L = Lead time SUBHOJIT DUTTA . Q. – The lot size. 4/11/2012 SUBHOJIT DUTTA 5 . – Sometimes called a fixed interval reorder system or a periodic reorder system. so total demand between reviews varies. and the time between orders is fixed at P. may change from one order to the next.Periodic Review (P) System • Periodic review (P) system: A system in which an item’s inventory position is reviewed periodically rather than continuously. – A new order is always placed at the end of each review. – Demand is a variable. A Water Tank Analogy for P system Inventory Level Supply Rate PERIODIC MONITORING PERIODIC MONITORING Inventory Level Demand Rate SUBHOJIT DUTTA PERIODIC MONITORING . Periodic Review System (P) • Fixed interval reorder system or periodic reorder system Four of the original EOQ assumptions maintained No constraints are placed on lot size Holding and ordering costs Independent demand Lead times are certain Order is placed to bring the inventory position up to the target inventory level. T. has elapsed SUBHOJIT DUTTA 7 . P. when the predetermined time. A Periodic Review (P) System SUBHOJIT DUTTA . Periodic Review System (1) • Instead of reviewing continuously.(For example. we review the inventory position at fixed intervals. • Inventory brought up to a ‘target’ level • Also known as “P system”. the bread truck visits the grocery store on the same days every week). “Fixed-order-interval system” or “Fixed-order-period system” SUBHOJIT DUTTA . Periodic Review System • Has a target inventory rather than a reorder point. • Does not have EOQ since quantity varies according to demand. not the order quantity. SUBHOJIT DUTTA . • The order interval is fixed. less-expensive safety stocks SUBHOJIT DUTTA .Comparison of Q and P Systems Convenient to administer Orders for multiple items from the same supplier may be combined Inventory Position (IP) only required at review Systems in which inventory records are always current are called Perpetual Inventory Systems P Systems Q Systems Review frequencies can be tailored to each item Possible quantity discounts Lower. Inventory systems • Q-system order QUANTITY is constant lower order limit signal size for the stock replenishment • P-system order PERIOD is constant upper order limit missing quantity up to limit is ordered 4/11/2012 SUBHOJIT DUTTA 12 . Using P and Q Systems in Practice • P may be easier to use since levels are reviewed less often. Q in monitoring cost. • P requires more safety stock since may only order at fixed points. • P is more likely to run out since cannot respond to increases in demand immediately • Either may be more costly: P in safety stock. SUBHOJIT DUTTA . com 4/11/2012 14 SUBHOJIT DUTTA .SOURCES • • • • • • • • Project report Journal: Business research Forrester Research 2011 KPMG-FICCI Report http://www.wikipedia.in www.google.google.com/inventory/management www.in www.nic.co.indiainbusiness. FINALLY 4/11/2012 SUBHOJIT DUTTA 15 .