Question

in what type of company would you chose the periodic-order-quantity rule of lot sizing and why? and how would it work with this example?

what type of company uses the periodic-order-quantity rule of lot sizing in supply chain management?

Answer 1

A company requiring usage of raw material and other supplies in consistent quantities and having the demand highly predictable use periodic-order-quantity rule of lot sizing during production. For example, companies producing products in batches and shipping to various retailers or distributors. Combining several orders into one large consignment in order to optimize transportation costs. Such as manufacturers of flavored drinks, chips and ready-to-eat meals, etc. These are produced in lot sizes to benefit from economies of scale.

A company dealing with materials required on regular basis use periodic-order-quantity rule of lot sizing in supply chain management. For example, companies producing daily usage products such as soaps, toothpaste, powders, etc. These items are required by customers throughout the year. It's raw material is ordered on a regular basis, i.e. replenishment activity is preset and functions on it's own unless any change such as a formula change or design change is initiated.