Handbook of Civil Engineering Calculations

FIGURE 13. Second stage in finding most economical route.

A reserve stock of parts is not needed. Determine the most economical lot size and the
corresponding cost of production.

Calculation Procedure:

1. Compute the parts delivery rate
   Assume that the parts are delivered to the buyer at a uniform rate, and compute the daily
   delivery rate. Since there are approximately 260 working days per year, the rate of deliv-
   ery = 41,600 parts/260 days = 160 parts per day.


2. Construct an inventory-time diagram
   Figure 14 shows such a diagram, starting with zero inventory.


3. Compute the peak inventory
   for a lot size of N
   The time OA required to produce 1 lot, Fig.
   14, = lot size/maximum production rate =
   TV/800, days. The slope of OB = rate of pro-
   duction - rate of delivery = 800 - 160 = 640
   parts per day. Then AB = (M800)(640) =
   0.87V parts.


4. Compute the total annual
   cost in terms of N
   The number of runs per year = 41,600/JV.
   Also, the annual cost of setup and teardown
   = $550(41,600/AO = 22,880,000/7V. Further,

Time

FIGURE 14. Variation in inventory level.

Inventory