Groff Reorder Procedure Optimum Lot-Sizing Procedures

1. The Groff reorder procedure is based on the fact that additional storage costs are equal to the saving in lot size independent costs according to the "classical" lot sizing formula for the minimum costs. Additional storage costs resulting from an increase in the lot size are, therefore, compared with the resulting savings in lot size independent costs.

   Starting from a certain period, the system keeps grouping requirements into a lot until the increase in the average storage costs per period is larger than the decrease in the lot size independent costs per period.

   

   The following figures are used in the example:

   Price: $20

   Lot size independent rcosts: $100

   Storage costs percentage: 10%

   In the example of the Groff reorder procedure above, the optimum lot size is 1000 pieces because, for a further requirement of 1000 pieces, additional storage costs would then exceed the savings in lot size independent costs.