Which lot-sizing technique orders the quantity needed during a predetermined time between orders?
A. economic order quantity
B. periodic order quantity
D. time fencing
E. part-period balancing
The Correct Answer Is:
- B. periodic order quantity
Periodic Order Quantity is a lot-sizing technique that orders the quantity needed during a predetermined time between orders. In inventory management, periodic order quantity (POQ) is based on demand and lead time to determine the optimal order quantity for a particular product. Each order is placed at a fixed interval, such as once a week or every month, and the quantity ordered is sufficient to meet the demand until the next order is placed. By finding the optimal balance between ordering too much and too little inventory, this technique can reduce inventory management costs, such as carrying costs and shortage costs.
EOQ and ROP are inventory management techniques that are often used together to optimize inventory levels, such as Periodic Order Quantity (POQ). Using POQ, you can determine the most efficient order quantity and ordering frequency to minimize total inventory costs.
Stockouts and inventory shortages can have a significant impact on a company’s operations when POQ is used, which is one of its major advantages. Keeping production lines running smoothly and meeting customer demand requires the right quantities of inventory ordered at the right times.
In addition to reducing inventory costs, POQ simplifies order processing. The cost of ordering and receiving inventory can be reduced if organizations order larger quantities less often. While reducing inventory levels, organizations can also reduce the costs of storing and maintaining inventory.
In summary, POQ is a highly effective inventory management technique that balances ordering and carrying inventory costs with the risk of shortages and stockouts. POQ can help organizations minimize inventory costs and maximize operational efficiency by determining the optimal order quantity and frequency of ordering.