Managing Economies of Scale in a Supply Chain - The role of cycle inventory in a supply chain
3 important questions on Managing Economies of Scale in a Supply Chain - The role of cycle inventory in a supply chain
What is a lot or batch size?
The quantity that a stage of a supply chain either produces or purchases at a time
How do you calculate the average flow time resulting from cycle inventory?
Average Inventory / average flow rate = Q / 2D
Why does cycle inventory exist?
Because the different stages of the supply chain exploit economies of scale to lower total cost. Total cost considered includes material cost, fixed ordering cost and holding cost.
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