Have you ever heard the question, what lot size should we order? Or, what’s the lot size of the inventory? In this lecture we will demystify this question and provide some clarity on what a Lot Size is.
Formally defined, Lot size refers to the quantity of an item ordered for delivery on a specific date or manufactured in a single production run. The size of the lot can vary significantly and is typically determined by demand but is usually adjusted to a higher quantity so that purchasers can take advantage of volume discounts when purchasing or manufacturing. Also, in general higher lot sizes also result in less expensive transportation costs. In other words, lot size basically refers to the total quantity of a product ordered for manufacturing. Put another way, the lot size is the amount of a good produced or purchased at one time.
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