Under which conditions would a plant manager elect to use a fixed-order quantity model as opposed to a fixed-time period model? What are the disadvantages of using a fixed-time period ordering system?

The answers are provided below

Explanation:

The fixed order quantity system is an arrangement whereby the inventory level is typically continuously monitored and also the replenishment stock is ordered based on the previously-fixed quantities while for a fixed time period model, the inventory levels are checked on regular basis for the items e.g every week.

A plant manager may elect to use a fixed-order quantity model as opposed to a fixed-time period model when the holding cost is much higher. Typically, fixed order quantity model is typically used for the costly items.

The disadvantages of using a fixed-time period ordering system are:

i. It doesn't consider market structure changes

ii. There should be a high level of inventory in order to avoid stock out.

iii. It leads to rigidity in the system as it makes the decision on time period complex when there's need for urgency.

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