Continuous Review
Definition
An inventory policy where stock is monitored constantly and a fixed quantity is ordered whenever inventory falls to the reorder point. Order quantity is fixed while order timing varies with demand.
In Practice
Continuous review, often written as the (Q, R) policy, watches inventory position after every transaction. The moment it reaches the reorder point R, an order for quantity Q, frequently the EOQ, is released. Because the exposure to stockout is limited to the lead time rather than lead time plus a review interval, it requires less safety stock than periodic review for the same service level.
Modern ERP and inventory systems make continuous review the default for most items, since perpetual inventory records update in real time. The planner's job shifts to keeping the parameters current: recalculating R when demand or lead time shifts, and revisiting Q when cost structures change.
Example: a fastener distributor runs continuous review on its A items. A surge in orders pushes a bracket's inventory position through its 1,400-unit reorder point mid-morning, and the system releases a 5,000-unit PO the same day, three days earlier than the usual weekly buying cycle would have.
Related Calculators
Related Terms
An inventory policy where stock levels are checked at fixed intervals and an order is placed to raise inventory to a target level. Order timing is fixed while order quantity varies.
Reorder PointThe inventory level that triggers a replenishment order. It equals expected demand during supplier lead time plus safety stock.
Economic Order QuantityThe order size that minimizes the combined cost of ordering and holding inventory. EOQ balances the fixed cost of placing orders against the cost of carrying stock.
Inventory PositionThe total stock available to meet future demand, calculated as on-hand inventory plus on-order inventory minus backorders and committed allocations. It is the number replenishment decisions should be based on.