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This video tutorial explains the concept of Production Order Quantity (POQ), contrasting it with Economic Order Quantity (EOQ). Unlike EOQ, which applies when purchasing inventory from suppliers, POQ pertains to production, where inventory is generated in-house. In POQ, production continues until the holding costs equal the ordering or set-up costs, thereby minimizing both. A key distinction is that, during production, some inventory is sold or used, which means that the total inventory levels do not start from zero and reach the maximum point. Instead, there is a modified approach reflected in the production order quantity sheet, indicating a lower inventory carry level.