An Economic Lot-Sizing Technique I: The Part-Period Algorithm

As a lot-sizing technique for minimizing the sum of ordering and inventory costs, the algorithm described is based on some simple dimensions. By dividing the ordering and setup costs by the inventory holding costs per part per time period, the ordering costs are expressed in partperiods. This value is used to determine lot size. First a simplified version is shown for demand sets that do not vary widely between periods. For large variations in demand, significantly greater overall accuracy is achieved with simple look-ahead and lookback tests which are also discussed. Two of the more important economic lot-sizing algorithms compared with the Part Period Algorithm.