In a periodic automatic replenishment (PAR) system, what happens when inventory levels drop?

In a periodic automatic replenishment (PAR) system, when inventory levels drop, the primary function is to ensure that stock levels are maintained at a predetermined amount. This involves automatically replacing the items to restore inventory to its desired level. The goal is to minimize shortages while also reducing excess inventory.

The mechanism works by monitoring stock levels at set intervals and triggering replenishment orders when the inventory falls below a certain threshold. This proactive approach helps ensure that necessary items are always available for use, thus preventing disruptions in operations due to stockouts.

The other options do not align with the core principles of a PAR system. For instance, discarding items does not relate to maintaining stock levels, as that would lead to even more shortages. Consignment storage refers to a different inventory management practice where the goods remain the supplier's property until they are used, which is distinct from a replenishment system. Lastly, while placing orders based on past usage might occur in various inventory systems, it is not the defining feature of a periodic automatic replenishment system, which specifically focuses on maintaining inventory levels at predetermined amounts.