Period-order-quantity (POQ)
Excel Spreadsheet Template for Material Requirements Planning (MRP) using Period-order-quantity (POQ). The POQ model is an alternative lot-sizing model for coping with lumpy demand.
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.
