Economic Batch Quantities for Manufactured Parts

The fundamental assumption in the classical Economic Batch Quantity model is that the products which are manufactured by a company have demands which are independent of each other. In an assembly operation, the demand for the components is mainly due to the demand for the parent assembly and hence the classical model is not applicable. In such a situation, requirements planning methodology may be successfully employed. A case study is described in this paper in which a number of factors besides set-up and stock-holding costs are considered. The results have proved to be of considerable benefit to the company.