Optimization of a Few Lot Sizes to Cover a Range of Requirements

In some stock holding situations, only a small number of lot sizes is feasible or even desirable. This paper defines rules for obtaining the optimal ratios between the lot sizes and for determining the range of requirements appropriate to each lot size.In particular, results have been tabulated for a log-normal distribution of requirements. It is found that with only a small number of lot sizes there is a very small increase in cost above the theoretical minimum. It is shown how the results can be simplified in the design of re-ordering systems with negligible increase in cost.An example is given which shows how the grouped items can also be ordered with simple frequencies.