1. Briefly discuss the effects of reducing lot size on ordering costs and holding costs. What is the role of small lot sizes in lean / JIT? If smaller lot sizes are mandated, briefly discuss what is necessary to economically get there, based on the economic order quantity formula. (On this answer you may use bullets and you do not need to follow the format of the model essay. Pack in the info.) Limit answer to one page. Bullets or short answers.
Where Q = lot size quantity in units, Q0 = economic order quantity
H = cost to carry one unit of inventory for a year
S = Setup or order cost (cost to place one order)
D = Annual demand
TC = Total cost (exclusive of purchasing discounts)
