Which statement describes fixed-order quantity models?

Disable ads (and more) with a membership for a one time $4.99 payment

Prepare for the UCF supply chain midterm. Utilize flashcards, multiple choice questions, and detailed explanations. Ace your test with these comprehensive study tools!

The statement that describes fixed-order quantity models accurately reflects the essential nature of this inventory management approach. Fixed-order quantity models are designed to determine the exact amount of stock to reorder whenever inventory levels reach a predetermined point, often referred to as the reorder point. This trigger happens specifically when the inventory level drops to a critical level, such as when stock runs out or reaches a certain threshold, prompting an immediate reorder to replenish inventory.

This method contrasts sharply with time-based models, where inventory is reviewed at set intervals regardless of the current stock level, thus potentially leading to overstock or stockouts. Also, while reducing overhead costs can be a goal of inventory management generally, it is not a defining feature of fixed-order quantity models. Lastly, while historical sales data can inform various inventory decisions, the core characteristic of this model is its reliance on current inventory levels as a trigger for order placement rather than solely on past sales data.