How to determine the size of the order and parties

Transportation of goods is cheaper, the larger the lot size. At the same time, the cost of storage prevents the purchase of products in too large volumes. The more goods delivered at a time, the higher it is, and the less rationally used warehouse space. To solve this problem, it is necessary to correctly calculate the optimal batch size.

Instruction manual

1

The calculation of the optimal level of stock allows you to determine a batch size at which the total cost of storage and delivery is minimal.

2

To calculate the required quantity of goods in one batch, you will need to determine three indicators: the total cost of servicing the order, storage costs per unit of output and total consumption for the period.

3

The costs of servicing an order consist of indicators such as: preparation and maintenance of contracts, transportation, document flow and telephone calls and the salary of an employee of the supply department.

4

Data on salary, negotiation and workflow are taken for the billing period and are divided by the number of units of goods received at the warehouse during this time.

5

Transportation costs are also calculated per unit of goods. Summarize the obtained indicators and designate them C0.

6

The next indicator that you will need for calculations is the storage costs per unit of output. To determine it, calculate how much each month the maintenance of the warehouse costs you. This data includes rent or property taxes if the warehouse belongs to you, the salary of the warehouse employees and utilities.

7

Calculate the average warehouse turnover per month in basic units (kilograms or pieces). By dividing the cost of maintaining the warehouse by the value of the turnover, you will find out how much it costs to store a unit of goods for a month. Label this indicator H.

8

The last indicator is the volume of consumption for the period. This is just the sales volume or production volume for the reporting period in basic units. Designate it as Q.

9

Now substitute the three metrics into the formula known as Wilson's formula.

10

The result obtained q is the lot size at which the total costs will be minimal. Do not forget to round it depending on the multiplicity of packaging. So, if as a result you get the optimal lot size of 3608 pieces, and the ordered products are delivered in a multiple of 20, round up the amount received to 3600 pcs.

note

Wilson's classic formula is widely used in logistics. It is calculated for the following working conditions: impossibility of deficit, the instant nature of replenishment of the level of stocks and the gradual rate of consumption of goods.

There are several different modifications of the formula, depending on the specific working conditions of the enterprise, for example, the possibility or impossibility of a deficit, the gradual replenishment of stocks or other data.