Production Order Quantity (POQ) Calculator

More about the Production Order Quantity for you to have a better understanding of the results provided by this solver. The production order quantity is a type of inventory policy that computes the order quantity $POQ$ that minimizes the total annual inventory costs, that consists of the sum of the annual setup costs and the annual holding costs.

Production Order Quantity Formula

This optimal order quantity is computed by means of the following formula:

$$POQ = \sqrt{\frac{2DS}{H \left(1 - \frac{d}{p} \right)}}$$

How do you calculate POQ?

You need to collect the terms needed to plug into the formula. This is, you need the annual demand, order setup cost, daily demand rate and daily production rate.

Observe that the daily demand is obtained by dividing the yearly demand by the number of working days (usually 250 days).

What is the formula for average inventory quantity?

The average inventory depends very simply on the order quantity. Indeed, if the order quantity is $Q*$, then the formula for the average inventory quantity is

$$\text{ Average Inventory} = \frac{Q*}{2}$$

Other Inventory Model Calculators

Depending on the assumptions linked to the process, other inventory policies could be used, such as the economic order quantity model .

Another type of inventory calculator is the single period calculator, where the decision of the order quantity is based on the cost of overage and value of salvage.