Logistics
| Optimal lot size, Q*= √(2DS)/(hC) | |
| D = Annual demand of the product | |
| S = Fixed cost incurred per order | |
| C = Cost per unit | |
| h = Holding cost per year as a fraction of cost | |
| Annual material cost = CD | |
| Number of orders per year=D/Q | |
| Annual order cost = (D/Q)S | |
| Annual holding cost = (Q/2)H=(Q/2)hC | |
| Total annual cost TC = CD + (D/Q)S + (Q/2)hC | |
| Optimal ordering frequency n*=D/Q*=√(DhC)/2S | |
| for more than one articles | |
| n* = √ (D1*h*C1) + (D2*h*C2) + (D3*h*C3) / 2S° | |
| S° = S(common order cost) + s1+s2+s3 (1,2,3 - Order specific costs) | |
| Annual order cost = S°n | |
| Annual holding cost = (D1 h C1 / 2n) + (D2 h C2 / 2n) +(D3 h C3 / 2n) | |
| Ex: | D: 1.000 * 12 (Months) = 12.000 Units |
| S: Order cost per lot = 4.000 € | |
| C: Unit cost per computer = 500 € | |
| h: 20% or 0,2 | |
| ----------------- | |
| Optimal order size = √(2*12.000*4.000)/(0,2*100)=980 | |
| § Cycle Inventory = Q/2=980/2=490 | |
| § Numb. of orders per year = D/Q=12.000/490=12 | |
| § Annual ordering and holding cost = | |
| = (D/Q)S+(Q/2)hC= 12*4000+490*0,2*500=97.980€ | |
| §Average flow time =Q/2D= 980/(2*12.000)=0,041year=0,49month | |
Source: Supply Chain Mgmt, Sunil Chopra, Peter Meindl |
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