Operations
Manager
POQ Overview
Period-order-quantity (POQ)
 Production
economics may dictate the use of lot-sizing in MRP systems but the
EOQ rarely works very well. The problem is that the EOQ is
based on the assumption that demand is continuous and uniform. In
MRP systems, demand for component parts tends to be "lumpy,"
that is, discontinuous and nonuniform, with frequent periods of
zero demand. When the EOQ is applied to lumpy demand, lot sizes
usually don't cover whole periods of demand. The result is
that unnecessary inventory is often carried during the periods following
the receipt of a lot. This unnecessary inventory is called
"remnants" because it is left over from previous lots. The
period-order-quantity (POQ) model was designed to avoid remnants
and give lower costs with lumpy demand.
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