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Lot for Lot vs Fixed Order Quantity Simulator

Lot for lot orders exactly what MRP needs each period. Fixed order quantity orders the same batch every time and carries the surplus. Which is cheaper depends on how expensive an order is compared with holding stock, and this simulator shows the crossover.

Your numbers

units

Setup, purchasing and receiving cost per order

22 %

Capital, storage, insurance and obsolescence

48 weeks

Lot for lot places one order per week with demand

units

Your results

Lot for lot annual cost
$4,080
Ordering cost only; receipts arrive when needed so holding is close to zero
Fixed order quantity annual cost
$1,808
Ordering cost plus average inventory holding cost
Annual demand
6,240
Holding cost per unit per year
$3
Economic order quantity (reference)
587
Saving from fixed quantity (negative means lot for lot is cheaper)
$2,272

Simplified annual cost model with steady demand and no stockouts. Real demand is lumpy, so test your actual weekly requirements in a worksheet before changing lot sizing rules.

Save results:

Fixed order quantity annual cost vs order size

Sweeps Fixed order quantity from 50 to 2000, holding your other inputs fixed.

Lot sizing review from your ERP data

Optional: ask for a review of lot sizing rules against your real demand history.

Optional. The tool and every export work without this. No spam.

How to use the simulator

Enter average weekly demand, the cost to place or set up one order, the unit cost and your holding rate. Set how many weeks of the year actually have demand, and the fixed order quantity you are considering. The calculator compares both annual costs and the economic order quantity as a reference. The chart sweeps the fixed quantity from small to large so you can see where cost bottoms out.

The formulas behind it

Lot for lot cost is the number of orders times order cost, with holding cost assumed near zero because receipts match requirements. Fixed quantity cost is annual demand divided by the batch size times order cost, plus half the batch times holding cost per unit per year. The EOQ is the square root of two times annual demand times order cost divided by holding cost per unit, the point where ordering and holding costs are equal.

Reading the result

With high setup cost and cheap parts, a larger fixed quantity wins because it spreads the order cost. With expensive parts, short shelf life or engineered items, lot for lot wins because holding dominates. The flat bottom of the curve matters: ordering within 20 to 30 percent of the EOQ costs little, so supplier pack sizes and minimums can usually decide the practical quantity.

Limits and ERP notes

The model assumes steady demand. In MRP, lumpy dependent demand makes a fixed quantity leave surplus that is carried until the next requirement. Most ERPs offer lot for lot, fixed quantity, period order quantity and minimum maximum rules on the item master, and the right choice often differs by ABC class. Use lot for lot for A items and expensive components, and larger lots for cheap C items.

Frequently Asked Questions

When is lot for lot the better lot sizing rule?

When order or setup costs are low relative to holding cost: expensive, perishable, made to order or fast obsolescing items. It also suits environments with short lead times and reliable suppliers, since there is little surplus stock to carry.

What is the economic order quantity?

The order size that minimises the sum of ordering and holding cost under steady demand. It equals the square root of two times annual demand times order cost, divided by annual holding cost per unit.

Why does fixed order quantity cost rise when the batch is too big?

Average inventory is roughly half the batch, so holding cost grows in proportion to batch size, while ordering cost only falls slowly once the number of orders is small. Past the EOQ, extra holding outweighs the savings.

Does this replace a period order quantity analysis?

No. It compares two common rules with average demand. For actual lumpy requirements, test period order quantity or Silver Meal style rules on your real weekly demand with a worksheet or your ERP simulation mode.

Netray can analyse your ERP's real order history to show which items are sized wrongly and what the lot sizing change would cost or save.