Abstract
In this chapter, we discuss lot-sizing heuristics that can be used to manage inventory of a single item whose demand varies from period to period. Because the demand is not constant the classical EOQ formula cannot be applied. Several heuristics are found in literature. The popular ones that have been considered in this chapter are (1) lot-for-lot method, (2) part-period balancing method, (3) least unit cost method, (4) silver-meal method, and (5) Wagner-Whitin method. The primary goal of these heuristics is to determine the lot size that would minimize the total ordering and carrying costs. Depending on the situation, one of these heuristics can be implemented to obtain least cost inventory management solution.
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Notes
- 1.
A mixture of spices.
- 2.
See terminology in Sect. 5.1.
- 3.
It should be noted that EOQ must be used only when the demand is constant, i.e., the demand does not vary by time. This question is provided only for student learning. For further reading please, see works by Nahmias (2015, pp. 459) and Srinivasan (2010, pp. 178).
References
Nahmias, S. (2005). Production and operations analysis (5th ed.). Boston: McGraw-Hill International Edition.
Silver, E. A., & Meal, H. C. (1973). A heuristic for selecting lot size quantities for the case of a deterministic time-varying demand rate and discrete opportunities for replenishment. Production and Inventory Management, 14(2), 64–74.
Silver, E. A., Pyke, D. F., & Peterson, R. (1998). Inventory management and production planning and scheduling (Third ed.). New York: Wiley.
Sreekumar, M. D., Reddy, C. E., & Chetty, O. V. K. (1991). An improved lot sizing policy for variable demand. In S. N. Dwivedi, A. K. Verma, & J. E. Sneckenberger (Eds.), CAD/CAM robotics and factories of the future ‘90. Berlin, Heidelberg: Springer.
Srinivasan, G. (2010). Quantitative models in operations and supply chain management. New Delhi: PHI Learning Pvt. Ltd.
Wagner, H. M., & Whitin, T. (1958). Dynamic version of economic lot-size model. Management Science, 5(1), 89–96.
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Shenoy, D., Rosas, R. (2018). Lot-Sizing Heuristics. In: Problems & Solutions in Inventory Management . Springer, Cham. https://doi.org/10.1007/978-3-319-65696-0_5
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DOI: https://doi.org/10.1007/978-3-319-65696-0_5
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