To compute lot-size-related costs

As part of the optimization procedure for logistic parameters, LN calculates the total cost during the optimized period.

Note

The computation only considers the time period that you specified in the Resource Cost Values (cprao3120m000) session.

Calculation
 TC = ICC + COI + SCN + SCO 

Where:

TCtotal cost during optimized period
ICCinventory carrying cost
COIcost of obsolete items
SCNsetup cost (normal rate)
SCOsetup cost (overtime rate)

 

Inventory carrying cost
 ICC = AIL * (IP/100)* C * L 

Where:

ICCinventory carrying cost
AILaverage inventory level
IPinventory cost percentage
Cmaterial cost of the item (standard cost price)
Llength of time period (in days)

 

Example: inventory carrying cost

Data:

AIL1200 kg (average inventory level)
IP0.1 %/day (inventory cost percentage)
C45 $/kg (material value)
L30 days (length of time period)

 

ICC = AIL * (IP/100) * C * L 

Result of the calculation: ICC = 1620 $ (inventory carrying cost for the period of 30 days)

Cost of obsolete items
 COI = AIL * C * (Ri/100) * L/F 

Where:

COIcost of obsolete items
AILaverage inventory level
Cmaterial cost of the item (standard cost price)
Ririsk of turning obsolete (percentage by day)
Llength of time period (in days)
Fnumber of times that the item is produced in the time period

 

Example: Cost of obsolete items

Data:

AIL1200 kg (average inventory level)
C45 $/kg (material value)
Ri1 %/day (risk of turning obsolete)
L30 days (length of time period)
F20 (number of times that the item is produced in the time period)

 

 COI = AIL * C * (Ri/100) * L/F 

Result of the calculation COI = 810 $ (cost of obsolete items)

 AIL = D / (2 * F) 

Where:

Dtotal demand during the time period (in inventory unit)
Fnumber of times that the item is produced

 

Example: average inventory level

Data:

L30 days (length of time period)
D48,000 kg (total demand during the time period)

 

If the inventory is replenished once every 30 days, to a level of 48,000 kg, the average level is 24,000 kg.

However, if the inventory is replenished 20 times in every 30 days, to a level of 2400 kg, the average level is 1200 kg.

 AIL = D / (2 * F) 

Result of the first calculation:

F1 (number of times that the item is produced)
AIL24,000 kg (average inventory level)

 

Result of the second calculation: F = 20 AIL = 1200 kg

 F = D / LS	 

Where:

Fnumber of times that the item is produced
Dtotal demand during the time period (in inventory unit)
LSlot size

 

Setup cost (normal rate)
 SCN = F * S' * R * (1 + SR/100) 

Where:

SCNsetup cost (normal rate)
Fnumber of times that the item is produced
S'setup time during normal working hours [hours]
Roperation rate (cost per hour)
SRthe setup rate percentage of the resource

 

Setup cost (overtime rate)
 SCO = F * S" * R * (1 + SR/100) * (1 + OR/100) 

Where:

SCOsetup cost (overtime rate)
S"setup time during overtime hours [hours]
ORovertime rate percentage

 

You can define the following data in the Resource Cost Values (cprao3120m000) session:

  • Start Date
  • Finish Date
  • Overtime Tariff % (OR)
  • Overtime Percentage (SR)
  • Risk % (Ri)
  • Inventory Cost % (IP)

The result of the computation is displayed in the Plan Items - Optimized Lot Sizes (cprao3110m000) session.