A Business Encyclopedia

Fixed Period Ordering

Definition: The Fixed Period Ordering is an inventory control system, wherein the order for the replenishment of inventory items is sent periodically or after a fixed time interval. It is also called as Fixed Period Deficit Ordering system, because every time the order is placed, the order quantity is different.

Thus, fixed period ordering is a method wherein the firm places an order with the supplier for the supply of different quantities of material at a fixed time interval. This enables a firm to take into consideration the sales trend and the customer’s preferences in a particular period before placing the replenishment order with the supplier.

The fixed period ordering system is helpful for a firm in the following ways:

  • The large fluctuations in the demand patterns can be handled efficiently.
  • The seasonal variations are considered before placing an order.
  • The inventory can be managed more efficiently, by continually checking it against the pre-set reorder level.
  • Best suited for the “A” category inventory items, which are of high value.
  • A longer lead time is manageable.

Thus, Fixed ordering system enables a firm to procure that much inventory which is required in a particular period and helps in reducing the unnecessary expenditure in the form of funds blocked in inventory items of no use.

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