Optimum lot size "WI" - Least unit cost procedure

Posted by Jessica Li Jan 22, 2015

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.

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

- 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.

- 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.

Calculation Logic
Calculation result of this sample.
Requirement
Date

Requirement
qty

Lot
Size

2015/2/6

1000

1000

2015/2/13

1000

2015/2/20

1000

2015/2/27

1000

Lot Size Ind. Cost

100

Storage
Cost

Total Cost Unit Cost

100

0.100

2000

38.36

138.36

0.069

3000

76.71

215.07

0.072

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.

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