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<ManualTopic ID="/baanerp/cp/onlinemanual/000066" xml:lang="en">
	<Header>
		<Title xmlns:ssa="http://www.ssaglobal.com" xmlns:HTML="http://www.w3.org/TR/REC-html40">To compute lot-size-related costs</Title>
		<Keyword><Level1>Lot-size related costs</Level1>
			<Level2>computing</Level2>
		</Keyword>
	</Header>
	<GeneralSection><Paragraph>As part of the optimization procedure for logistic parameters, SSA ERP calculates the total cost during the optimized period.</Paragraph>
		<Note><SectionTitle>Note</SectionTitle>
			<Paragraph>The computation only considers the time period that you specified in the <GUIRef href="/baanerp/cp/rao/cprao3120m000" role="session">Resource Cost Values (cprao3120m000)</GUIRef> session.</Paragraph>
		</Note>
		<GeneralSection><SectionTitle>Calculation</SectionTitle>
			<Formula><Paragraph UserLevel="Novice" UserType="Taskuser"> TC = ICC + COI + SCN + SCO </Paragraph>
			</Formula>
			<Paragraph>Where:</Paragraph>
			<TABLE border="1"><TBODY><TR><TD>TC</TD>
						<TD>total cost during optimized period</TD>
					</TR>
					<TR><TD>ICC</TD>
						<TD><Link href="/baanerp/wh/glossary/glossary#000328" role="glossary">inventory carrying cost</Link>
						</TD>
					</TR>
					<TR><TD>COI</TD>
						<TD>cost of obsolete items</TD>
					</TR>
					<TR><TD>SCN</TD>
						<TD>setup cost (normal rate)</TD>
					</TR>
					<TR><TD>SCO</TD>
						<TD>setup cost (overtime rate)</TD>
					</TR>
				</TBODY>
			</TABLE>
		</GeneralSection>
		<GeneralSection><SectionTitle>Inventory carrying cost</SectionTitle>
			<Formula><Paragraph UserLevel="Novice" UserType="Taskuser"> ICC = AIL * (IP/100)* C * L </Paragraph>
			</Formula>
			<Paragraph>Where:</Paragraph>
			<TABLE border="1"><TBODY><TR><TD>ICC</TD>
						<TD>inventory carrying cost</TD>
					</TR>
					<TR><TD>AIL</TD>
						<TD>average inventory level</TD>
					</TR>
					<TR><TD>IP</TD>
						<TD>inventory cost percentage</TD>
					</TR>
					<TR><TD>C</TD>
						<TD>material cost of the item (standard cost price)</TD>
					</TR>
					<TR><TD>L</TD>
						<TD>length of time period (in days)</TD>
					</TR>
				</TBODY>
			</TABLE>
		</GeneralSection>
		<GeneralSection><SectionTitle>Example: inventory carrying cost</SectionTitle>
			<Paragraph>Data:</Paragraph>
			<TABLE border="1"><TBODY><TR><TD>AIL</TD>
						<TD>1200 kg (average inventory level)</TD>
					</TR>
					<TR><TD>IP</TD>
						<TD>0.1 %/day (inventory cost percentage)</TD>
					</TR>
					<TR><TD>C</TD>
						<TD>45 $/kg (material value)</TD>
					</TR>
					<TR><TD>L</TD>
						<TD>30 days (length of time period)</TD>
					</TR>
				</TBODY>
			</TABLE>
			<Formula><Paragraph UserLevel="Novice" UserType="Taskuser">ICC = AIL * (IP/100) * C * L </Paragraph>
			</Formula>
			<Paragraph>Result of the calculation: ICC = 1620 $ (inventory carrying cost for the period of 30 days)</Paragraph>
		</GeneralSection>
		<GeneralSection><SectionTitle>Cost of obsolete items</SectionTitle>
			<Formula><Paragraph UserLevel="Novice" UserType="Taskuser"> COI = AIL * C * (Ri/100) * L/F </Paragraph>
			</Formula>
			<Paragraph>Where:</Paragraph>
			<TABLE border="1"><TBODY><TR><TD>COI</TD>
						<TD>cost of obsolete items</TD>
					</TR>
					<TR><TD>AIL</TD>
						<TD>average inventory level</TD>
					</TR>
					<TR><TD>C</TD>
						<TD>material cost of the item (standard cost price)</TD>
					</TR>
					<TR><TD>Ri</TD>
						<TD>risk of turning obsolete (percentage by day)</TD>
					</TR>
					<TR><TD>L</TD>
						<TD>length of time period (in days)</TD>
					</TR>
					<TR><TD>F</TD>
						<TD>number of times that the item is produced in the time period</TD>
					</TR>
				</TBODY>
			</TABLE>
		</GeneralSection>
		<GeneralSection><SectionTitle>Example: Cost of obsolete items</SectionTitle>
			<Paragraph>Data:</Paragraph>
			<TABLE border="1"><TBODY><TR><TD>AIL</TD>
						<TD width="317">1200 kg (average inventory level)</TD>
					</TR>
					<TR><TD>C</TD>
						<TD width="317">45 $/kg (material value)</TD>
					</TR>
					<TR><TD>Ri</TD>
						<TD width="317">1 %/day (risk of turning obsolete)</TD>
					</TR>
					<TR><TD>L</TD>
						<TD width="317">30 days (length of time period)</TD>
					</TR>
					<TR><TD>F</TD>
						<TD width="317">20 (number of times that the item is produced in the time period)</TD>
					</TR>
				</TBODY>
			</TABLE>
			<Formula><Paragraph UserLevel="Novice" UserType="Taskuser"> COI = AIL * C * (Ri/100) * L/F </Paragraph>
			</Formula>
			<Paragraph>Result of the calculation COI = 810 $ (cost of obsolete items)</Paragraph>
			<Formula><Paragraph UserLevel="Novice" UserType="Taskuser"> AIL = D / (2 * F) </Paragraph>
			</Formula>
			<Paragraph>Where:</Paragraph>
			<TABLE border="1"><TBODY><TR><TD>D</TD>
						<TD>total demand during the time period (in inventory unit)</TD>
					</TR>
					<TR><TD>F</TD>
						<TD>number of times that the item is produced</TD>
					</TR>
				</TBODY>
			</TABLE>
		</GeneralSection>
		<GeneralSection><SectionTitle>Example: average inventory level</SectionTitle>
			<Paragraph>Data:</Paragraph>
			<TABLE border="1"><TBODY><TR><TD>L</TD>
						<TD>30 days (length of time period)</TD>
					</TR>
					<TR><TD>D</TD>
						<TD>48,000 kg (total demand during the time period)</TD>
					</TR>
				</TBODY>
			</TABLE>
			<Paragraph>If the inventory is replenished once every 30 days, to a level of 48,000 kg, the average level is 24,000 kg.</Paragraph>
			<Paragraph>However, if the inventory is replenished 20 times in every 30 days, to a level of 2400 kg, the average level is 1200 kg.</Paragraph>
			<Formula><Paragraph UserLevel="Novice" UserType="Taskuser"> AIL = D / (2 * F) </Paragraph>
			</Formula>
			<Paragraph>Result of the first calculation:</Paragraph>
			<TABLE border="1"><TBODY><TR><TD>F</TD>
						<TD>1 (number of times that the item is produced)</TD>
					</TR>
					<TR><TD>AIL</TD>
						<TD>24,000 kg (average inventory level)</TD>
					</TR>
				</TBODY>
			</TABLE>
			<Paragraph>Result of the second calculation: F = 20 AIL = 1200 kg</Paragraph>
			<Formula><Paragraph UserLevel="Novice" UserType="Taskuser"> F = D / LS	 </Paragraph>
			</Formula>
			<Paragraph>Where:</Paragraph>
			<TABLE border="1"><TBODY><TR><TD>F</TD>
						<TD>number of times that the item is produced</TD>
					</TR>
					<TR><TD>D</TD>
						<TD>total demand during the time period (in inventory unit)</TD>
					</TR>
					<TR><TD>LS</TD>
						<TD>lot size</TD>
					</TR>
				</TBODY>
			</TABLE>
		</GeneralSection>
		<GeneralSection><SectionTitle>Setup cost (normal rate)</SectionTitle>
			<Formula><Paragraph UserLevel="Novice" UserType="Taskuser"> SCN = F * S' * R * (1 + SR/100) </Paragraph>
			</Formula>
			<Paragraph>Where:</Paragraph>
			<TABLE border="1"><TBODY><TR><TD>SCN</TD>
						<TD>setup cost (normal rate)</TD>
					</TR>
					<TR><TD>F</TD>
						<TD>number of times that the item is produced</TD>
					</TR>
					<TR><TD>S'</TD>
						<TD>setup time during normal working hours [hours]</TD>
					</TR>
					<TR><TD>R</TD>
						<TD>operation rate (cost per hour)</TD>
					</TR>
					<TR><TD>SR</TD>
						<TD>the setup rate percentage of the resource</TD>
					</TR>
				</TBODY>
			</TABLE>
		</GeneralSection>
		<GeneralSection><SectionTitle>Setup cost (overtime rate)</SectionTitle>
			<Formula><Paragraph UserLevel="Novice" UserType="Taskuser"> SCO = F * S" * R * (1 + SR/100) * (1 + OR/100) </Paragraph>
			</Formula>
			<Paragraph>Where:</Paragraph>
			<TABLE border="1"><TBODY><TR><TD>SCO</TD>
						<TD>setup cost (overtime rate)</TD>
					</TR>
					<TR><TD>S"</TD>
						<TD>setup time during overtime hours [hours]</TD>
					</TR>
					<TR><TD>OR</TD>
						<TD>overtime rate percentage</TD>
					</TR>
				</TBODY>
			</TABLE>
			<List><ListIntro>You can define the following data in the <GUIRef href="/baanerp/cp/rao/cprao3120m000" role="session">Resource Cost Values (cprao3120m000)</GUIRef> session:</ListIntro>
				<ListItem><GUIRef href="/baanerp/cp/rao/cprao3120m000#cprao320.stdt" role="formfield">Start Date</GUIRef>
				</ListItem>
				<ListItem><GUIRef href="/baanerp/cp/rao/cprao3120m000#cprao320.fidt" role="formfield">Finish Date</GUIRef>
				</ListItem>
				<ListItem><GUIRef href="/baanerp/cp/rao/cprao3120m000#cprao320.ovta" role="formfield">Overtime Tariff %</GUIRef> (OR)</ListItem>
				<ListItem><GUIRef href="" role="manual">Change Over Tariff</GUIRef> (SR)</ListItem>
				<ListItem><GUIRef href="/baanerp/cp/rao/cprao3120m000#cprao320.ripe" role="formfield">Risk %</GUIRef> (Ri)</ListItem>
				<ListItem><GUIRef href="/baanerp/cp/rao/cprao3120m000#cprao320.mape" role="formfield">Inventory Cost %</GUIRef> (IP)</ListItem>
			</List>
			<Paragraph>The result of the computation is displayed in the <GUIRef href="/baanerp/cp/rao/cprao3110m000" role="session">Plan Items - Optimized Lot Sizes (cprao3110m000)</GUIRef> session.</Paragraph>
		</GeneralSection>
	</GeneralSection>
	<RelatedTopics><SectionTitle>Related topics</SectionTitle>
		<RelTopic><Link href="/baanerp/cp/onlinemanual/000131" role="manual">Optimization algorithm for logistic parameters</Link>
		</RelTopic>
		<RelTopic><Link href="/baanerp/cp/onlinemanual/000067" role="manual">To compute the cost of obsolete items</Link>
		</RelTopic>
	</RelatedTopics>
</ManualTopic>
