Fixed Order Quantity

The number of unites that the company should include to the inventory in order to minimize the total expense that is involved in the inventory is referred to as the economic order quantity. The cost of inventory includes the order cost, the holding cost, and even the shortage costs. When the inventory level attains particular reorder point then a fixed quantity is ordered. This economic order quantity plays a vital role in calculating   the accurate reorder point.

The fixed order quantity is mainly the arrangement which helps a continuous monitoring and ordering of the replenishment stock. The replenishment stock would be ordered whenever the stock at hand attains the reorder point.

The fixed order quantity model can be used when the inventory is very expensive or when the inventory becomes more important to you than you would never take chance to have stock out for the particular inventory. This is also used when there is too much of expense in maintaining the inventory.

On the other hand, the POQ which is expanded as the production order quantity is a particular kind of model that finds an answer for the questions when to order and how much to produce. The holding cost in the EOQ can be lowered by using the materials immediately which are produced.

The main focus of the fixed order quantity is to reorder points in the order quantities. The basic question what is inventory should be clearly understood before taking a look at the Fixed-order quantity model. When a quantity or a particular store of goods are kept for some sort of purpose, then that is called inventory.  Either it be kept in-house or it is kept in a distant warehouse or even it be kept in a distribution center. The main purpose of the inventory is to keep things in hold. There are firms that hold inventories that are excess in order to ensure the operation of the firm. Inventory management is an art which has got several functions. This art is taught in several schools of thoughts.

The other names of the fixed order quantity are the economic order quantity, the EOQ and the Q model.  The fixed order quantity is the source for initiating the order. It is like a trigger that trigger up the order when the order reaches a specific reorder level. The remaining inventory is needed to be monitored continuously in order to make the fixed –order quantity effective. It needs to be updated regularly in order to reach a particular order.