A company wants to determine the best lot-sizing technique to determine the ordering schedule for a component Y that they are…

A company wants to determine the best lot-sizing technique to determine the ordering schedule for a

component Y that they are ordering from one of their suppliers. They would like to compare the

following three options:

– lot-for-lot

– EOQ lot sizes

– Silver-Meal method

The best technique would be the one that will guarantee the lowest costs of managing the inventories,

that is inventory holding and ordering costs. Ordering/setup cost is estimated to be 80 EUR and the

holding cost per week is 1 EUR per unit. Delivery lead time is 1 week.

They have already determined the gross requirements for the component Y through the following 10

weeks and they are given in the following table:

1 2 3 4 5 6 7 8 9 10

Gross requirements 30 50 0 20 40 0 60 0 30 40

On-hand inventory 65

Net requirements

Planned order receipts

Planned order releases

First determine the net requirements and then think about using different lot sizing options to satisfy

these requirements.

Questions:

For the proposed three lot sizing techniques determine the ordering schedule (Planned order releases)

for the following 10 weeks and calculate the cost of managing the inventories. Which technique

performs the best?

What is the difference if the holding cost per week changes to 2 EUR per unit?