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Lot Size Optimization

Efficient order quantities (EOQs) incorporate the cost to place an order ( POC ), the forecasted annual demand ( FAD ), the inventory-carrying rate ( ICR ), and the unit inventory value ( UIV ).  Large order quantities yield high inventory levels and high inventory carrying costs but fewer orders and lower ordering costs.  High ordering costs and demand rates suggest large order quantities.  High inventory carrying rates and high unit inventory values suggest small order quantities.

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