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    sir saqib ppt

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    4 views12 pages

    sir saqib ppt

    Uploaded by

    syedhafza4

    Copyright:

    © All Rights Reserved
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    Production Order Quantity Model

    Optimizing Production and


    Inventory Management

    Presented by:
    Muhammad Taqi
    Abdul Haq
    Muhammad Farooq
    Production Order
    Quantity Model
    The production order quantity model is a key
    component in effective inventory management,
    helping businesses optimize their production and
    ensure they have the right amount of stock to meet
    customer demand efficiently.

    Importance:
    Balances production efficiency with inventory
    carrying costs.
    Overview of Production Management
    Planning Execution Optimization
    Forecasting demand, scheduling, Effective coordination of Continuous improvement and
    and resource allocation are processes, inventory control, and data-driven decision making can
    crucial for production quality assurance are essential for help enhance production
    management. successful production. efficiency.
    Inventory Management
    Principles
    1 Availability 2 Efficiency
    Ensuring the right Minimizing carrying
    products are in stock to costs and optimizing
    meet customer demand. inventory levels.

    3 Visibility 4 Agility
    Maintaining accurate Adapting inventory
    and up-to-date strategies to respond to
    information on changes in the market
    inventory levels and and customer needs.
    movements.
    Key Components of the
    POQ Model
    1 Demand Rate 2 Setup Costs
    Constant rate at which Costs associated with
    products are sold. preparing equipment for
    production.

    3 Holding Costs 4 Production Rate


    Costs for storing unsold Rate at which products
    inventory (storage, are manufactured.
    insurance, depreciation).
    Factors Affecting
    Production Order Quantity
    Demand Forecasting Lead Times
    Accurate predictions of The time required to procure
    future customer demand raw materials and complete
    are crucial for determining the production process
    optimal order quantities. impacts order quantities.

    Storage Capacity Cost Considerations


    Limited storage space may Balancing production,
    necessitate smaller, more ordering, and holding costs to
    frequent production runs. minimize total expenditure.
    The Economic Order Quantity
    (EOQ) Model
    1 Demand Analysis
    Evaluate historical sales data and forecasts to
    determine the expected demand for a product.

    2 Cost Calculation
    Determine the fixed costs of ordering, as well as
    the variable costs of holding inventory.

    3 Optimization
    Apply the EOQ formula to find the order quantity
    that minimizes total inventory costs.
    Calculating the Optimal Order
    Quantity
    Demand (D)
    Estimated annual customer demand for the product.

    Ordering Cost (A)


    Fixed cost per order, including administrative and
    transportation expenses.

    Holding Cost (H)


    Variable cost of storing and maintaining one unit of
    inventory for one year.

    EOQ Calculation
    Using the formula: EOQ = √(2AD/H)
    Reorder Point and Safety
    Stock

    Lead Time Demand Rate


    The time between placing an The average rate at which
    order and receiving the new customers consume the
    inventory. product.

    Safety Stock Reorder Point


    Additional inventory kept on The inventory level that
    hand to buffer against triggers a new production
    stockouts. order.
    Implementing the Production
    Order Quantity Model
    Step 1 Collect data on demand,
    ordering costs, and holding
    costs.
    Step 2 Calculate the Economic
    Order Quantity (EOQ)
    using the formula.
    Step 3 Determine the reorder point
    based on lead time and
    desired safety stock.

    Step 4 Monitor inventory levels


    and adjust order quantities
    as needed.
    Applications of the POQ
    Model

    • Commonly used in manufacturing


    industries where production and
    inventory management are crucial.
    • Helps in scheduling production runs
    for items with steady demand patterns.
    Conclusion

    The POQ model is a valuable tool for


    optimizing production quantities, balancing
    costs, and enhancing operational efficiency.

    Understanding and applying the POQ model


    can lead to significant improvements in
    supply chain management.

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