<?xml version="1.0" encoding="utf-8"?>
<ManualTopic ID="/baanerp/cp/onlinemanual/000066" xml:lang="en">
   <Header>
      <Title>To compute lot-size-related costs</Title>
      <Keyword type="header" order="d1e200616">
         <Level1>Lot-size related costs</Level1>
         <Level2>computing</Level2>
      </Keyword>
   </Header>
   <GeneralSection>
      <Paragraph>As part of the
      optimization procedure for logistic parameters, ERP Enterprise 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 space-and-orientation="indented-estimated">
            <Paragraph> TC = ICC + COI + SCN + SCO </Paragraph>
         </Formula>
         <Paragraph>Where:</Paragraph>
         <TABLE border="1" borderstyle="default" space-and-orientation="indented-estimated">
            <TBODY noTR="5">
               <TR no="1" isLast="false">
                  <TD rowspan="1" colspan="1">TC</TD>
                  <TD rowspan="1" colspan="1">total cost during optimized period</TD>
               </TR>
               <TR no="2" isLast="false">
                  <TD rowspan="1" colspan="1">ICC</TD>
                  <TD rowspan="1" colspan="1">
                     <Link href="/baanerp/wh/glossary/glossary#000328" role="glossary">inventory carrying cost</Link>
                  </TD>
               </TR>
               <TR no="3" isLast="false">
                  <TD rowspan="1" colspan="1">COI</TD>
                  <TD rowspan="1" colspan="1">cost of obsolete items</TD>
               </TR>
               <TR no="4" isLast="false">
                  <TD rowspan="1" colspan="1">SCN</TD>
                  <TD rowspan="1" colspan="1">setup cost (normal rate)</TD>
               </TR>
               <TR no="5" isLast="true">
                  <TD rowspan="1" colspan="1">SCO</TD>
                  <TD rowspan="1" colspan="1">setup cost (overtime rate)</TD>
               </TR>
            </TBODY>
         </TABLE>
      </GeneralSection>
      <GeneralSection>
         <SectionTitle>Inventory carrying cost</SectionTitle>
         <Formula space-and-orientation="indented-estimated">
            <Paragraph> ICC = AIL * (IP/100)* C * L </Paragraph>
         </Formula>
         <Paragraph>Where:</Paragraph>
         <TABLE border="1" borderstyle="default" space-and-orientation="indented-estimated">
            <TBODY noTR="5">
               <TR no="1" isLast="false">
                  <TD rowspan="1" colspan="1">ICC</TD>
                  <TD rowspan="1" colspan="1">inventory carrying cost</TD>
               </TR>
               <TR no="2" isLast="false">
                  <TD rowspan="1" colspan="1">AIL</TD>
                  <TD rowspan="1" colspan="1">average inventory level</TD>
               </TR>
               <TR no="3" isLast="false">
                  <TD rowspan="1" colspan="1">IP</TD>
                  <TD rowspan="1" colspan="1">inventory cost percentage</TD>
               </TR>
               <TR no="4" isLast="false">
                  <TD rowspan="1" colspan="1">C</TD>
                  <TD rowspan="1" colspan="1">material cost of the item (standard cost price)</TD>
               </TR>
               <TR no="5" isLast="true">
                  <TD rowspan="1" colspan="1">L</TD>
                  <TD rowspan="1" colspan="1">length of time period (in days)</TD>
               </TR>
            </TBODY>
         </TABLE>
      </GeneralSection>
      <GeneralSection>
         <SectionTitle>Example: inventory carrying cost</SectionTitle>
         <Paragraph>Data:</Paragraph>
         <TABLE border="1" borderstyle="default" space-and-orientation="indented-estimated">
            <TBODY noTR="4">
               <TR no="1" isLast="false">
                  <TD rowspan="1" colspan="1">AIL</TD>
                  <TD rowspan="1" colspan="1">1200 kg (average inventory level)</TD>
               </TR>
               <TR no="2" isLast="false">
                  <TD rowspan="1" colspan="1">IP</TD>
                  <TD rowspan="1" colspan="1">0.1 %/day (inventory cost percentage)</TD>
               </TR>
               <TR no="3" isLast="false">
                  <TD rowspan="1" colspan="1">C</TD>
                  <TD rowspan="1" colspan="1">45 $/kg (material value)</TD>
               </TR>
               <TR no="4" isLast="true">
                  <TD rowspan="1" colspan="1">L</TD>
                  <TD rowspan="1" colspan="1">30 days (length of time period)</TD>
               </TR>
            </TBODY>
         </TABLE>
         <Formula space-and-orientation="indented-estimated">
            <Paragraph>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 space-and-orientation="indented-estimated">
            <Paragraph> COI = AIL * C * (Ri/100) * L/F </Paragraph>
         </Formula>
         <Paragraph>Where:</Paragraph>
         <TABLE border="1" borderstyle="default" space-and-orientation="indented-estimated">
            <TBODY noTR="6">
               <TR no="1" isLast="false">
                  <TD rowspan="1" colspan="1">COI</TD>
                  <TD rowspan="1" colspan="1">cost of obsolete items</TD>
               </TR>
               <TR no="2" isLast="false">
                  <TD rowspan="1" colspan="1">AIL</TD>
                  <TD rowspan="1" colspan="1">average inventory level</TD>
               </TR>
               <TR no="3" isLast="false">
                  <TD rowspan="1" colspan="1">C</TD>
                  <TD rowspan="1" colspan="1">material cost of the item (standard cost price)</TD>
               </TR>
               <TR no="4" isLast="false">
                  <TD rowspan="1" colspan="1">Ri</TD>
                  <TD rowspan="1" colspan="1">risk of turning obsolete (percentage by day)</TD>
               </TR>
               <TR no="5" isLast="false">
                  <TD rowspan="1" colspan="1">L</TD>
                  <TD rowspan="1" colspan="1">length of time period (in days)</TD>
               </TR>
               <TR no="6" isLast="true">
                  <TD rowspan="1" colspan="1">F</TD>
                  <TD rowspan="1" colspan="1">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" borderstyle="default" space-and-orientation="indented-estimated">
            <TBODY noTR="5">
               <TR no="1" isLast="false">
                  <TD rowspan="1" colspan="1">AIL</TD>
                  <TD width="317" rowspan="1" colspan="1">1200 kg (average inventory level)</TD>
               </TR>
               <TR no="2" isLast="false">
                  <TD rowspan="1" colspan="1">C</TD>
                  <TD width="317" rowspan="1" colspan="1">45 $/kg (material value)</TD>
               </TR>
               <TR no="3" isLast="false">
                  <TD rowspan="1" colspan="1">Ri</TD>
                  <TD width="317" rowspan="1" colspan="1">1 %/day (risk of turning obsolete)</TD>
               </TR>
               <TR no="4" isLast="false">
                  <TD rowspan="1" colspan="1">L</TD>
                  <TD width="317" rowspan="1" colspan="1">30 days (length of time period)</TD>
               </TR>
               <TR no="5" isLast="true">
                  <TD rowspan="1" colspan="1">F</TD>
                  <TD width="317" rowspan="1" colspan="1">20 (number of times that the item is produced in
              the time period)</TD>
               </TR>
            </TBODY>
         </TABLE>
         <Formula space-and-orientation="indented-estimated">
            <Paragraph> COI = AIL * C * (Ri/100) * L/F </Paragraph>
         </Formula>
         <Paragraph>Result of the
        calculation COI = 810 $ (cost of obsolete items)</Paragraph>
         <Formula space-and-orientation="indented-estimated">
            <Paragraph> AIL = D / (2 * F) </Paragraph>
         </Formula>
         <Paragraph>Where:</Paragraph>
         <TABLE border="1" borderstyle="default" space-and-orientation="indented-estimated">
            <TBODY noTR="2">
               <TR no="1" isLast="false">
                  <TD rowspan="1" colspan="1">D</TD>
                  <TD rowspan="1" colspan="1">total demand during the time period (in inventory unit)</TD>
               </TR>
               <TR no="2" isLast="true">
                  <TD rowspan="1" colspan="1">F</TD>
                  <TD rowspan="1" colspan="1">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" borderstyle="default" space-and-orientation="indented-estimated">
            <TBODY noTR="2">
               <TR no="1" isLast="false">
                  <TD rowspan="1" colspan="1">L</TD>
                  <TD rowspan="1" colspan="1">30 days (length of time period)</TD>
               </TR>
               <TR no="2" isLast="true">
                  <TD rowspan="1" colspan="1">D</TD>
                  <TD rowspan="1" colspan="1">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 space-and-orientation="indented-estimated">
            <Paragraph> AIL = D / (2 * F) </Paragraph>
         </Formula>
         <Paragraph>Result of the first
        calculation:</Paragraph>
         <TABLE border="1" borderstyle="default" space-and-orientation="indented-estimated">
            <TBODY noTR="2">
               <TR no="1" isLast="false">
                  <TD rowspan="1" colspan="1">F</TD>
                  <TD rowspan="1" colspan="1">1 (number of times that the item is produced)</TD>
               </TR>
               <TR no="2" isLast="true">
                  <TD rowspan="1" colspan="1">AIL</TD>
                  <TD rowspan="1" colspan="1">24,000 kg (average inventory level)</TD>
               </TR>
            </TBODY>
         </TABLE>
         <Paragraph>Result of the second
        calculation: F = 20 AIL = 1200 kg</Paragraph>
         <Formula space-and-orientation="indented-estimated">
            <Paragraph> F = D / LS	 </Paragraph>
         </Formula>
         <Paragraph>Where:</Paragraph>
         <TABLE border="1" borderstyle="default" space-and-orientation="indented-estimated">
            <TBODY noTR="3">
               <TR no="1" isLast="false">
                  <TD rowspan="1" colspan="1">F</TD>
                  <TD rowspan="1" colspan="1">number of times that the item is produced</TD>
               </TR>
               <TR no="2" isLast="false">
                  <TD rowspan="1" colspan="1">D</TD>
                  <TD rowspan="1" colspan="1">total demand during the time period (in inventory unit)</TD>
               </TR>
               <TR no="3" isLast="true">
                  <TD rowspan="1" colspan="1">LS</TD>
                  <TD rowspan="1" colspan="1">lot size</TD>
               </TR>
            </TBODY>
         </TABLE>
      </GeneralSection>
      <GeneralSection>
         <SectionTitle>Setup cost (normal rate)</SectionTitle>
         <Formula space-and-orientation="indented-estimated">
            <Paragraph> SCN = F * S' * R * (1 + SR/100) </Paragraph>
         </Formula>
         <Paragraph>Where:</Paragraph>
         <TABLE border="1" borderstyle="default" space-and-orientation="indented-estimated">
            <TBODY noTR="5">
               <TR no="1" isLast="false">
                  <TD rowspan="1" colspan="1">SCN</TD>
                  <TD rowspan="1" colspan="1">setup cost (normal rate)</TD>
               </TR>
               <TR no="2" isLast="false">
                  <TD rowspan="1" colspan="1">F</TD>
                  <TD rowspan="1" colspan="1">number of times that the item is produced</TD>
               </TR>
               <TR no="3" isLast="false">
                  <TD rowspan="1" colspan="1">S'</TD>
                  <TD rowspan="1" colspan="1">setup time during normal working hours [hours]</TD>
               </TR>
               <TR no="4" isLast="false">
                  <TD rowspan="1" colspan="1">R</TD>
                  <TD rowspan="1" colspan="1">operation rate (cost per hour)</TD>
               </TR>
               <TR no="5" isLast="true">
                  <TD rowspan="1" colspan="1">SR</TD>
                  <TD rowspan="1" colspan="1">the setup rate percentage of the resource</TD>
               </TR>
            </TBODY>
         </TABLE>
      </GeneralSection>
      <GeneralSection>
         <SectionTitle>Setup cost (overtime rate)</SectionTitle>
         <Formula space-and-orientation="indented-estimated">
            <Paragraph> SCO = F * S" * R * (1 + SR/100) * (1 + OR/100) </Paragraph>
         </Formula>
         <Paragraph>Where:</Paragraph>
         <TABLE border="1" borderstyle="default" space-and-orientation="indented-estimated">
            <TBODY noTR="3">
               <TR no="1" isLast="false">
                  <TD rowspan="1" colspan="1">SCO</TD>
                  <TD rowspan="1" colspan="1">setup cost (overtime rate)</TD>
               </TR>
               <TR no="2" isLast="false">
                  <TD rowspan="1" colspan="1">S"</TD>
                  <TD rowspan="1" colspan="1">setup time during overtime hours [hours]</TD>
               </TR>
               <TR no="3" isLast="true">
                  <TD rowspan="1" colspan="1">OR</TD>
                  <TD rowspan="1" colspan="1">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="manual">Start Date</GUIRef>
            </ListItem>
            <ListItem> 
               <GUIRef href="/baanerp/cp/rao/cprao3120m000#cprao320.fidt" role="manual">Finish Date</GUIRef>
            </ListItem>
            <ListItem> 
               <GUIRef href="/baanerp/cp/rao/cprao3120m000#cprao320.ovta" role="manual">Overtime Tariff Percentage</GUIRef> (OR)</ListItem>
            <ListItem> 
               <GUIRef href="" role="manual">Change Over Tariff</GUIRef> (SR)</ListItem>
            <ListItem> 
               <GUIRef href="/baanerp/cp/rao/cprao3120m000#cprao320.ripe" role="manual">Risk Percentage by Day</GUIRef> (Ri)</ListItem>
            <ListItem> 
               <GUIRef href="/baanerp/cp/rao/cprao3120m000#cprao320.mape" role="manual">Inventory Cost Percentage</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>