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Jemshah
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Asked: 2023-01-08T04:59:53+00:00 In:

An organization has adopted a periodic réview “system asa technique of controlling the amount of stock. Outline five disadvantages of the system. (10 marks)July 2020

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An organization has adopted a periodic réview “system asa technique of controlling the amount of stock. Outline five disadvantages of the system. (10 marks)July 2020

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    Enlightened
    1. Out-of-stock situations: Because the review is only conducted on a periodic basis, there may be times when the organization runs out of stock for certain items. This can lead to lost sales and customer dissatisfaction.
    2. Overstocking: The periodic review system may not accurately reflect changes in demand, which can lead to the organization overstocking certain items. This can result in excess inventory, which can tie up valuable resources such as capital and storage space.
    3. Increased lead times: Because the organization is not continuously monitoring its stock levels, it may take longer to replenish items that are running low. This can lead to longer lead times for acquiring materials, which can disrupt the production process.
    4. Inaccurate forecasting: The periodic review system may not provide accurate data for forecasting future demand, which can lead to incorrect assumptions about stock levels and can result in shortages or excesses of materials.
    5. Increased costs: The periodic review system may result in higher costs due to the need to expedite orders or to dispose of excess inventory.
    6. Lack of visibility: The periodic review system may not provide real-time visibility into stock levels, which can make it difficult for the organization to accurately assess its material requirements.
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