Posted in Operations and Supply Chain Terms, Total Reads: 1601
Definition: Fixed Order Quantity (FOQ)
An inventory management system in which replenishment stock is ordered when the stock reaches a reorder point and the replenishment quantity is kept fixed irrespective of external circumstances. It is termed as FOQ – Fixed Order Quantity.
It tells us when to order and how much to order. The two important parameters here are the order quantity and the reorder point.
The fixed order system has been used for some time and keeps stock levels fairly stable. As a result this ensures that there are no stock outs unless there is a great level of fluctuations in demand.
The fixed order will also have been set after the economic order quantity has been established, so the fixed order ensures that orders are placed when they are economically viable, so there is less wastage in terms of ordering supplies.
The fixed point also enables the stock to be monitored and replenished with little human input. The technology assists to monitor stock levels and orders are generated automatically, so there is no risk of someone simply ‘forgetting’ to place an order.