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Optimum lot size “WI” – Least unit cost procedure

Three groups of Lot-sizing procedures are available:

  • Static lot-sizing procedures
  • Period lot-sizing procedures
  • Optimum lot-sizing procedures

I will explain here about one of the Optimum lot-sizing procedures: Least unit cost procedure (WI).

Feature

Starting from the shortage date, successive requirements are grouped together to form lots until total costs per unit reach a minumum level. The total cost are equal to the sum of the lot size independent costs plus the total storage costs.

Prerequisite

– Lot size field (MRP 1 view) is set with WI for Least unit cost procedure.

– Lot size independent costs (MRP 1 view) and storage costs indicator (MRP 1 view) is set.

  Ordering costs is 100 in this sample.

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   Storage costs percentage for storage cost indicator 1 of plant 1000 is 10% in this sample. It is maintained in customizing OMI4.

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– Price is set. It depends on price control. If price control is V, the price is “Moving price”; if price control is S, the price is “Standard price”.

  Price is 20 in this sample.

1-21-2015 1-20-09 PM.png

– Requirements exist. In this sample, there are 4 planned independent requirements (PIRs). They are with date 2015/2/6, 2015/2/13, 2015/2/20 and 2015/2/27.

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Calculation Logic

Calculation result of this sample.

Requirement Date Requirement qty Lot Size Lot Size Ind. Cost Storage Cost Total Cost Unit Cost
          2015/2/6           1000      1000           100                0           100      0.100
          2015/2/13           1000      2000         38.36      138.36      0.069
          2015/2/20           1000      3000         76.71      215.07      0.072
          2015/2/27           1000      4000       115.07      330.14

     0.083

Since the Unit cost for Lot Size 2000 is minimum, requirements are grouped together to form lots with qty 2000.

1-21-2015 2-00-25 PM.png

Formula

– Lot size = current Lot Size + new requirement qty.

– Storage Cost = ( Requirement * Price * Storage Cost  Percentage * Time in shortage ) / ( 100 * 365)

– Total Cost = current Total Cost + Newly calculated Storage Cost

– Unit Cost = Total Cost / Lot Size

Explaination

On 2015/2/6, shortage occurs.

            Time in shortage is 0 days.

            Storage cost = 0.

            Total cost = storage cost 0 + Lot size ind. cost 100 = 100

            Unit cost = Total cost 100 / Lot size 1000 = 0.100

On 2015/2/13

            Time in shortage is 7 days.

            Storage cost = (requirement qty 1000 * price 20 * percentage 10 * Time in shortage 7 ) / (100 * 365) = 38.36

            Total cost = storage cost 38.36 + current total cost 100 = 138.36

            Unit cost = Total cost 138.36 / Lot size 2000 = 0.069

On 2015/2/20

            Time in shortage is 14 days.

            Storage cost = (requirement qty 1000 * price 20 * percentage 10 * Time in shortage 14 ) / (100 * 365) = 76.71

            Total cost = storage cost 76.71 + current total cost 138.36 = 215.07

            Unit cost = Total cost 215.07 / Lot size 3000 = 0.072

On 2015/2/27

            Time in shortage is 21 days.

            Storage cost = (requirement qty 100 * price 20 * percentage 10 * Time in shortage 21 ) / (100 * 365) = 115.07

            Total cost = strorage cost 115.07 + current total cost 215.07 = 330.14

            Unit cost = Total cost 330.14 / Lot size 4000 = 0.083

Source Code

See attached text file.

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