In periodic review systems, what does the order-up-to level describe?

• A. The minimum stock level kept between reviews.
• B. The target order quantity for each replenishment.
• C. The time between reviews.
• D. The maximum inventory level to which current inventory is raised at each review.

Answer: (D)

In periodic review systems, the order-up-to level is the target maximum stock you aim to have after each review. At the fixed review time, you place enough replenishment to raise your inventory position up to that level. The actual amount you order is the difference between the order-up-to level and your current inventory position (on-hand plus any outstanding orders, minus backorders). This level acts as a ceiling, not a minimum you must hold, and it isn’t the time between reviews or a fixed quantity per replenishment. For example, if the order-up-to level is 100 units and you currently have 70 on hand with 10 on order, you would place an order for 20 to bring the total up to 100.