How can we calculate the optimal lot size for procurement or purchasing of our inventory?

Dear,

please refer to the below link for better knowledge of the lot sizing formula

http://www.slideshare.net/anandsubramaniam/lot-sizing-techniques

To Control Inventory, we need to have Buffer Levels of All Stock. So We need to Order Only that much Quantity which can be or Should be Ordered.

calculate total purchase stock items per year.

Bonjour à tous ,

Lorsque le stock de l’article atteint son niveau minimum, une commande est émise en quantité « Q ». La formule de calcul du lot économique est connue sous le nom de « formule de WILSON » 

its depends on any purchase and amount of consumption , lead time and available space for keeping inventory , Processiong Time and many other factors can determine the optimal lot size for procurment .

By using EOQ or by studying the supply and demand of the product in the market.

Based on last three years (statistcs) consumption & re-ordering point for Purchased.

To calculate the optimal lot size for purchasing our inventory, we have to evalute the following:

Carrying cost per unit per year = C

Fixed cost per order = F

Demand in units per year = D

Use:

Economic Order Quantity is the optimal order size to minimize our inventory costs

 We can calculate using formula (EOQ)Economic Order Quantity=√2 x Co x D/Ch,where Co is the cost of placing one order,D is the annual demand,and Ch is the annual cost of holding one unit of inventory.

The size of lot for any purchase depends on

- Average consumption

- Max time for delivery including shipping and clearance time

- Space availalbe at warehouse

We can calculate the optimal lot size for procurement of our inventory by calculating the below..

(1) Our Annual Usage Size (which means how much of products we expect to sell in an year. Eg 150 units)

(2) Our Setup Cost (which is the one-off cost incurred each time we order goods that includes mainly of administrative costs Eg 10 $)

(3) Annual Holding Cost per Unit (which is the amount it costs us to keep the stock for one year such as rent for storage space, bank loan interest, insurance fee etc. Eg Annual Holding Costs is 3,500 $)

Ann. Hold. Cost /Ann. Usage = Ann. Hold. Cost per Unit

3500 /150 = 23.33

(4) Optimal Order Quantity

{2*(Ann. Usage in Units * Setup Cost /Ann. Hold. Cost per Unit }^(1/2)

{2*(150*10)/23.33}^(1/2)

= 11.33