What do you mean by Optimal Lot Size ?
Optimal Lot Size refers to the most beneficial quantity of goods to produce at one time, balancing various factors such as production costs, inventory carrying costs, customer demand, and economies of scale. Determining the optimal lot size is crucial for businesses to operate efficiently and effectively. It involves finding the right balance between the costs of production or procurement and the costs associated with holding excess inventory. Producing or ordering in larger quantities may lead to economies of scale and lower unit costs, but it can also result in higher inventory carrying costs, risk of obsolescence, and tied-up capital. Several methods can be used to calculate the optimal lot size, including Economic Order Quantity, Production Batch Size, Just-in-Time inventory systems, and demand forecasting techniques. These methods consider factors such as setup costs, holding costs, demand variability, production capacity, and supplier constraints to determine the most cost-effective lot size.
How to Calculate Optimal Lot Size?
Optimal Lot Size calculator uses Optimal Lot Size = sqrt((2*Sales Volume*Cost Per Run)/(Stock Expense Ratio+Interest Expense Ratio)) to calculate the Optimal Lot Size, Optimal Lot Size represents the quantity that minimizes total costs while meeting customer demand and maintaining appropriate inventory levels. Optimal Lot Size is denoted by OLS symbol.
How to calculate Optimal Lot Size using this online calculator? To use this online calculator for Optimal Lot Size, enter Sales Volume (SV), Cost Per Run (CR), Stock Expense Ratio (SER) & Interest Expense Ratio (IER) and hit the calculate button. Here is how the Optimal Lot Size calculation can be explained with given input values -> 121.9875 = sqrt((2*1250*150)/(10.1+15.1)).