Final answer:
The P-System faces challenges in determining the right timing for orders and maintaining the appropriate inventory levels. These challenges can impact customer satisfaction and result in increased costs.
Step-by-step explanation:
The two main challenges of the P-system, also known as the periodic review system, involve the complexities associated with figuring out when to order and determining the amount of inventory to have on hand. In the P-system, orders are placed at regular intervals, which means the company must accurately forecast demand to prevent overstocking and understocking.
Excessive inventory leads to increased holding costs, while insufficient inventory can result in lost sales and unhappy customers. The length of the review period can make it challenging to respond swiftly to changing market conditions. Additionally, the length of the review period can also impact customer satisfaction if the product availability does not align with demand. Managers need to strike a balance between keeping enough stock to satisfy customer needs and minimizing costs associated with excessive inventory.