# 2.4.23 When to order inventory?

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When to order inventory? In the previous lecture we assumed that we’ll just order 200 units worth of inventory. Now in practice, it’s not quite as simple. Most companies are scrutinizing that decision very heavily and there are numerous, really thousands, of approaches of how you can determine how much inventory to order each time. I will review two methods the s.Q method and the s.S method. Open up any inventory textbook and you’ll see those two popular methods. The s.Q system and the s.S system. Now, the little s stands for reorder point, in other words when are you going to trigger an order?
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The second letter, the Q stands for a fixed quantity that is determined ahead of time, and the S stands for a variable quantity that depends on the current inventory level as you place the order. The s.Q system is a continuous review method, where we monitor our inventory at all times, and then once we hit the reorder point, we place an order of the same quantity.
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In the s.S system, it’s also a continuous review system, however, when we place an order, we are going to place it dependent on where we are currently in the inventory. So if we have a lower inventory, the order will be larger, because we order up to a certain level. So the order will be the difference between our current inventory and where we would like to be.
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Now let’s review advantages and disadvantages of both. Advantages of the s.Q system, is that it’s simple, it’s very predictable for our supplier. However, in certain cases, it may not be as precise and proficient. The s.S method, may make it harder for a supplier, but it is a very precise system of inventory. No matter if you’re selling strawberries, flowers, microchips, cars, or cats, inventory is a critical piece of your business. Knowing when to order inventory, knowing how much to order, is a critically important decision for your business. No matter which method you choose, either way you have to pick the right method in your situation.

Jim Rohn Sứ mệnh khởi nghiệp