POQ, EOQ, and MRP Technique Lot-Sizing
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Why will the POQ almost always outperform the EOQ as an MRP lot-sizing technique?
Your response should be at least 200 words in length. You are required to use at least your textbook as source material for your response. All sources used, including the textbook, must be referenced; paraphrased and quoted material must have accompanying citations.
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Solution Summary
Connection between Periodic Order Quantity, Economic Order Quantity and Material Requirement Planning Lot-Sizing Technique.
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To guide you in answering your question properly, we need to understand what each term in the question means.
Periodic Order Quantity (POQ)
A model used to order a definitive number of products or items to be obtained over an established time period. It is a method that is employed when the supply of raw materials or inventory (goods) is steady and foreseeable. With this approach, for example, a purchasing manager arranges for specified amounts of goods to be shipped at conventional periods that is set by means of a master purchase order agreement (Accounting Tools, 2015, p. 1). A purchasing manager records the specific quantity of goods received besides the overall total that was approved in alignment with the master procurement order, and can monitor a supplier's capability to ship goods on time (Accounting Tools, 2015, p. 1). POQ represents an easy and low-cost approach to order products or goods because it is a form of made to order that eliminates excess supply of products or goods.
Economic Order Quantity (EOQ)
EOQ model is used (1) for calculating the optimum quantity of products an organization can buy or produce to reduce the cost of carrying inventory and cost of processing purchase orders or production set-ups, (2) as part of a constant check inventory system where ...
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