Period Order Quantity

TermiKnowledge - Supply Chain, Procurement and Inventory Terminologies
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Under the common term, "period order quantity" (or PLU), the term "supply chain management" is used to define the process by which raw materials and finished goods are acquired and stored in the warehouse. Many-sizing method used in which the per-unit volume is equivalent to the net fixed requirements for a particular number of units, e.g., several weeks to the next. The anticipated number of units to be stocked is variable, and thus the ordering cost is also variable. To solve the problems faced by management while dealing with a large volume of orders, the system is designed in such a way that warehouse automation is employed. This automation system is built on the principle of the so-called WIP or what is in excess; the excess inventory is warehouses, and the extra unit bought is directly added to the production line. As this is done continuously, the problem of overstocked items in warehouses can be solved without affecting the flow of production.

In terms of costing structure, production lot sizes determine the prices of the raw materials or goods to be purchased and stored in the warehouse. The problem encountered when managing such lot sizes is whether the prices are equal in all situations or not. Solution of this problem is provided by means of production lot sizing. It means the setting of the maximum and minimum order quantities to be realized in every unit produced. When the total cost of production is established, the prices of raw materials, goods and labor can be established.

Period order quantity is also defined by the terms master production and level term. The master production refers to the current situation where no sales are recorded; therefore the cost of production is equal to the sum of all previous sales, including the sales not yet recorded. The level term defines the current trend which indicates that the tendency of sales is increasing and sometimes surpassing the level. There are three master production levels defined, namely current, trend and maximum order quantity; the first one refers to the current period in terms of production, while the maximum order quantity indicates the maximum number of units that can be produced at any point in time.

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