When determining lot sizes, it is crucial to balance ordering costs and carrying costs. Ordering costs
include expenses related to placing and receiving orders, such as administrative expenses, while
carrying costs involve the costs of holding inventory, such as storage, insurance, and opportunity
costs. The goal is to find an optimal order quantity that minimizes the total cost, which is achieved by
balancing these two types of costs. This balance is often calculated using the Economic Order
Quantity (EOQ) model.
Reference:
Chopra, S., & Meindl, P. (2016). Supply Chain Management: Strategy, Planning, and Operation.
Pearson.
Silver, E.A., Pyke, D.F., & Peterson, R. (1998). Inventory Management and Production Planning and
Scheduling. John Wiley & Sons.
