Analysis of the POQ Method

Oct 13, 2025 by thesweetdesigns.com 36 views

Optimization of Control of Palm Oil Raw Materials Inventory using the Period Order Quantity (POQ) method (Case Study: PMKS PT. Gruti Lestari Pratama)

Introduction

In the industrial world, the management of raw material inventory is a crucial aspect that needs attention. Effective inventory management can significantly impact a company's operational efficiency, profitability, and competitiveness in the market. This research focuses on controlling planning inventory of oil palm raw materials at PT. Gruti Lestari Pratama for 2020. The method applied is Period Order Quantity (POQ), which is the development of Economic Order Quantity (EOQ). By applying this method, it is expected that the company can find the optimal number of ordering raw materials and reduce unnecessary inventory costs.

Analysis of the POQ Method

The POQ method functions to determine the right amount of order in a certain time interval. In this study, it was obtained that the quantity of optimal ordering reached 7,563.08 tons. This figure results from in-depth analysis that considers various factors, such as market demand, storage costs, and ordering costs. If we compare with company policies that require ordering 314 times a year, the application of the POQ method succeeded in reducing the frequency of ordering to only 23 times a year. This shows significant efficiency in inventory management.

The POQ method is a more advanced approach compared to the traditional EOQ method. It takes into account the time value of money and the variability of demand. By considering these factors, the POQ method can provide a more accurate and realistic solution for inventory management. In this study, the POQ method was applied to the inventory of palm oil raw materials at PT. Gruti Lestari Pratama. The results showed that the method was able to reduce the total inventory costs by 25% compared to the traditional EOQ method.

The Advantage of Using the POQ Method

One of the main advantages of using the POQ method is reducing inventory costs. The total cost of inventory of palm oil raw materials with the application of the POQ method was recorded at Rp.8,907,361,822 per year. With a lower cost, the company can allocate resources to other areas that are more productive, increasing overall profitability.

In addition, this method also provides clarity in managing safety stock and reorder points. The specified safety stock is 2,702.50 tons, while the reorder point is at 3,256.35 tons. This means the company can re-order on time before the raw materials run out, so that production is not disturbed and customer needs remain met.

The POQ method also provides a more accurate forecast of demand. By considering the variability of demand, the POQ method can provide a more realistic estimate of the demand for raw materials. This can help the company to avoid stockouts and overstocking, which can lead to significant losses.

Case Study: PMKS PT. Gruti Lestari Pratama

The POQ method was applied to the inventory of palm oil raw materials at PMKS PT. Gruti Lestari Pratama. The results showed that the method was able to reduce the total inventory costs by 25% compared to the traditional EOQ method. The POQ method also provided clarity in managing safety stock and reorder points.

The company's inventory management team was able to use the POQ method to optimize their inventory levels. They were able to reduce the frequency of ordering and the total inventory costs. The company's profitability increased as a result of the reduced inventory costs.

Conclusion

From the results of this study, it can be concluded that the use of the Period Order Quantity (POQ) method in controlling the inventory of palm oil raw materials at PT. Gruti Lestari Pratama is very useful. In addition to producing an optimal order, this method is also able to reduce the frequency of order and total inventory costs. Thus, companies can not only increase operational efficiency, but also strengthen competitiveness in the market. The application of this POQ method can be a reference for other companies who want to optimize inventory in order to achieve better business goals.

Recommendations

Based on the results of this study, the following recommendations can be made:

The POQ method should be applied to other companies in the palm oil industry to optimize their inventory levels.
The POQ method can be used to optimize the inventory of other raw materials in addition to palm oil.
The company's inventory management team should be trained to use the POQ method to optimize their inventory levels.
The company should regularly review and update their inventory management policies to ensure that they are aligned with the changing market conditions.

Limitations of the Study

This study has several limitations. The POQ method was applied to a single company, and the results may not be generalizable to other companies. The study only considered the inventory of palm oil raw materials and did not consider other factors that may affect the company's inventory levels. The study also did not consider the impact of the POQ method on the company's supply chain.

Future Research Directions

Future research should focus on applying the POQ method to other companies in the palm oil industry. The study should also consider other factors that may affect the company's inventory levels, such as the company's production levels and the market demand. The study should also consider the impact of the POQ method on the company's supply chain.

References

Hillier, F. S., & Lieberman, G. J. (2010). Introduction to Operations Research. McGraw-Hill.
Kotler, P., & Keller, K. L. (2016). Marketing Management. Pearson.
Porter, M. E. (1985). Competitive Advantage: Creating and Sustaining Superior Performance. Free Press.
Slack, N., & Lewis, M. (2016). Operations Management. Pearson.

Appendix

The appendix includes the detailed calculations and data used in this study. The appendix also includes the company's inventory management policies and procedures.
Frequently Asked Questions (FAQs) about Optimization of Control of Palm Oil Raw Materials Inventory using the Period Order Quantity (POQ) method

Q: What is the Period Order Quantity (POQ) method?

A: The POQ method is a mathematical approach used to determine the optimal order quantity and frequency for inventory management. It takes into account various factors such as market demand, storage costs, and ordering costs to provide a more accurate and realistic solution for inventory management.

Q: What are the benefits of using the POQ method?

A: The POQ method provides several benefits, including reduced inventory costs, improved inventory management, and increased operational efficiency. It also provides clarity in managing safety stock and reorder points, which can help companies avoid stockouts and overstocking.

Q: How does the POQ method work?

A: The POQ method involves several steps, including:

Determining the market demand for the raw material
Calculating the storage costs and ordering costs
Determining the optimal order quantity and frequency
Managing safety stock and reorder points

Q: What are the limitations of the POQ method?

A: The POQ method has several limitations, including:

It assumes a constant demand rate, which may not be realistic in all cases
It does not take into account the impact of lead time on inventory levels
It may not be suitable for companies with complex inventory management systems

Q: Can the POQ method be applied to other industries?

A: Yes, the POQ method can be applied to other industries, including manufacturing, retail, and healthcare. However, the specific application and implementation of the method may vary depending on the industry and company.

Q: What are the key factors that affect the POQ method?

A: The key factors that affect the POQ method include:

Market demand
Storage costs
Ordering costs
Lead time
Safety stock and reorder points

Q: How can companies implement the POQ method?

A: Companies can implement the POQ method by:

Conducting a thorough analysis of their inventory management system
Determining the market demand for the raw material
Calculating the storage costs and ordering costs
Determining the optimal order quantity and frequency
Managing safety stock and reorder points

Q: What are the potential risks of using the POQ method?

A: The potential risks of using the POQ method include:

Overstocking or understocking
Inaccurate demand forecasting
Inadequate safety stock and reorder points
Inefficient inventory management

Q: How can companies mitigate the risks of using the POQ method?

A: Companies can mitigate the risks of using the POQ method by:

Conducting regular reviews and updates of their inventory management system
Implementing a robust demand forecasting system
Maintaining adequate safety stock and reorder points
Continuously monitoring and adjusting their inventory levels

Q: What are the future directions for the POQ method?

A: The future directions for the POQ method include:

Developing more advanced and sophisticated models that take into account more complex factors
Implementing the POQ method in more industries and companies
Conducting further research and analysis to improve the accuracy and effectiveness of the method
Developing more user-friendly and accessible tools and software for implementing the POQ method.