Lean Supply Chain Management Essentials

112 Lean suppLy ChaIn ManageMent essentIaLs

between lot size and capacity as the most important one, and has a lot sizing rule, inter-

val, which accommodates this view. Interval will be covered in depth in Chapter 7.

e thought behind traditional lot size management is the trade-off between inven-

tory carrying costs and the cost of ordering, shown here in graphic form. e idea is

to find a lot size where the cost of inventory and the cost of ordering equal each other,

which is the point of least total cost. Lean, as we will show in Chapter 7, worries less

about the cost and more about the lot size in terms of its impact on capacity.

Order Quantity

ere are three basic types of order quantity rules: economic order quantity, shown

above, which