Which one of the following statements concerning a continuous review system is best?
A) The inventory position (IP) of an item measures the item's ability to satisfy future demand, relying only on the on-hand inventory.
B) An item's inventory position under a continuous review system increases by Q units as soon as an order is received.
C) An item's on-hand inventory increases by Q units as soon as an order is placed.
D) Under a continuous review system, an item's inventory position corresponds to the on-hand inventory unless there are backorders or one or more scheduled receipts.

Question

Quizplus · Accepted Answer

In a continuous review system, the inventory position (IP) of an item corresponds to the on-hand inventory unless there are backorders or one or more scheduled receipts. Therefore, option D is the best statement as it correctly defines the inventory position under continuous review system. Option A is incorrect because it ignores the impact of future demand on the inventory position. Option B is incorrect because the increase in inventory position depends on the lead time and not on the order quantity. Option C is incorrect because the on-hand inventory does not increase until the ordered items are received.

Which One of the Following Statements Concerning a Continuous Review