When determining lot sizes, consideration should be given to balancing which of the following costs?
Correct Answer: D
When determining lot sizes, it is crucial to balance ordering costs and carrying costs. Ordering costs include expenses related to placing and receiving orders, such as administrative expenses, while carrying costs involve the costs of holding inventory, such as storage, insurance, and opportunity costs. The goal is to find an optimal order quantity that minimizes the total cost, which is achieved by balancing these two types of costs. This balance is often calculated using the Economic Order Quantity (EOQ) model.
References:
* Chopra, S., & Meindl, P. (2016). Supply Chain Management: Strategy, Planning, and Operation.
Pearson.
* Silver, E.A., Pyke, D.F., & Peterson, R. (1998). Inventory Management and Production Planning and Scheduling. John Wiley & Sons.