MAKE | Supply Chain Analytics

08

Batch Size Optimization

Finding the optimal production quantity

What Is It?

Batch Size Optimization finds the most cost-effective quantity of units to produce in a single production run.

  • Setup costs - Fixed costs for each production run
  • Holding costs - Inventory storage expenses
  • Production costs - Variable manufacturing costs

The goal is to balance economies of scale with responsiveness to market demand.

Business Objectives

Cost Efficiency

Reduce changeover costs, inventory holding, and capital tied up in unsold goods.

Production Flexibility

Enhance ability to respond to demand changes without excessive costs.

Process Improvement

Faster turnaround times and increased throughput.

Economic Batch Quantity (EBQ)

The standard formula for optimal batch size:

Q = √(2 × D × CO) / (CC × (1 - d/p))
Q = Batch Size
D = Annual Demand
CO = Setup Cost per batch
CC = Holding Cost per unit/year
d = Daily demand rate
p = Production rate per annum

Cost Components

Costs that INCREASE with batch size

  • Materials and labor costs
  • Cost of handling materials
  • Storage and warehousing
  • Capital tied up in inventory

Costs that DECREASE with batch size

  • Setup cost per unit
  • Paperwork and order costs
  • Machine changeover per unit
  • Administrative overhead per unit

Analytics Methods

EOQ Model

Economic Order Quantity for minimizing inventory costs

EPQ Model

Economic Production Quantity for manufacturing

Queueing Theory

Analyzing waiting line scenarios for batch processing

Simulation Modeling

Assess different batch sizes under varying conditions

Key Performance Indicators

Production Efficiency

Productive vs total available time

Capacity Utilization

Use of available production capacity

Cost per Unit

Total cost associated with each unit

Related Use Cases

Production Scheduling Inventory Optimization Manufacturing Cost Analysis
All MAKE Cases

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