A Simulation to Illustrate Periodic-Review Inventory Control Policies

Within an undergraduate or graduate operations management course, inventory management is a critical area of learning and understanding for all students. This teaching module usually includes a discussion of the differences between continuous (Q) and periodic (P) review inventory systems. In our teaching, we have found that the most difficult concept for students to grasp is the concept of the review interval for the periodic review system. Therefore, in this paper, we develop a simulation using Crystal Ball to demonstrate for students the importance of using the review period of P+L in a periodic review system and how using this interval protects a firm more adequately against stockouts. This tool also provides an opportunity to introduce simulation concepts into operations management courses that do not normally have time to present these concepts