The Review Period is the frequency at which a business evaluates its inventory levels and determines whether new stock needs to be ordered. This helps optimize stock replenishment, avoid stockouts, and reduce excess inventory holding costs.
Why is the Review Period Important?
- Avoids stockouts by replenishing inventory at the right time.
- Reduces ordering costs by grouping purchases instead of placing frequent small orders.
- Optimizes storage space by avoiding excessive stock levels.
- Balances supplier lead times to ensure smooth restocking.
How to Determine the Right Review Period
1. Supplier Lead Time
Your review period should not be shorter than your supplier’s lead time. For example, if your supplier takes 14 days to deliver inventory, your review period should be at least 14 days.
2. Sales & Demand Patterns
Consider demand frequency:
- Fast-moving items: Weekly or bi-weekly review
- Slow-moving products: Monthly review
- Seasonal items: Review before peak season
3. Balancing Ordering & Holding Costs
Use this formula to determine the ideal review period:
Review Period = Ordering Cost per Order / (Holding Cost per Unit per Day × Average Demand per Day)
4. Suggested Review Periods Based on Business Type
| Business Type | Recommended Review Period |
|---|---|
| Grocery/Retail (Fast-moving items) | Weekly |
| Consumer Electronics (Moderate movement) | Bi-weekly |
| Industrial Equipment (Slow-moving) | Monthly |
| Seasonal Products | Before peak season |
Using Review Period in Inventory Replenishment
How Review Period and Lead Time Function as Buffers
| Factor | Purpose | What It Buffers Against | Formula Impact |
|---|---|---|---|
| Supplier Lead Time | Ensures stock arrives before depletion. | Supplier delays, transit time. | (Lead Time × Forecasted Demand) |
| Review Period | Ensures stock lasts until the next review cycle. | Gaps between order placements. | (Review Period × Forecasted Demand) |
Key Takeaways
- Review Period acts as a second buffer, ensuring you don’t run out of stock between replenishment cycles.
- It is especially useful when ordering is not continuous but periodic (e.g., weekly, bi-weekly, monthly).
- Businesses should set it based on how often they review inventory and how quickly they can respond to demand changes.
Once the review period is set, inventory should be replenished up to the Target Stock level at each review cycle:
Target Stock = (Lead Time + Review Period) × Forecasted Daily Demand + Safety Stock
Getting Started
- Start with a bi-weekly review period (14 days) and adjust as needed.
- Track stock performance and make adjustments based on order frequency, stockouts, and supplier performance.
By implementing an optimized review period, businesses can significantly improve inventory management efficiency while maintaining the right stock levels.
Setting Review Period In Versa
You can set the review period in Versa as the system level or at the product level. Set the system level setting from Setup, Feature Settings, Inventory management. At the product level, this is set as part of the re-order point setting for an inventoried product.
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