Hector is the vice-president of Whirlpool Washing Machines and he wants to

determine the lot size order when there is a production requirement using a.) Lot-
for-Lot (L4L) Technique b.) Part Period Balancing (PPB) Technique. The Material
Requirement Plan (MRP) is generated for the next 9 weeks. How many units
should be ordered per week? How much is the total cost? The data summary is
presented below.

(a.) Lot-for-lot (L4L) Technique

Table 1: Inventory Summary

DEMAND ITEM VALUE

WEEK UNITS

1 17 HOLDING COST, $/UNIT/WEEK 1

2 0 SETUP COST, $ 75

3 24 LEAD TIME, WEEKS 2

4 39 BEGINNING INVENTORY, UNITS 32

5 45
NOTE: THE SAME FIGURES WILL BE USED FOR THE
6 26
TWO TECHNIQUES

7 13

8 31

9 18
Table 2: Material Requirements Plan

Materials Week
Requirement
1 2 3 4 5 6 7 8 9
Plan

Gross 17 0 24 39 45 26 13 31 18
Requirements

Schedule
Receipts

Projected on- 32 15 15 0 0 0 0 0 0
hand

Net 0 0 9 39 45 26 13 31 18
requirements

Planned order 0 0 9 39 45 26 13 31 18
receipt

Planned order 9 39 45 26 13 31 18 0 0
release

Table 3: Total Cost

Total Inventory Cost, $ Per unit Total units Total Cost

Holding cost, $ 1 62 62

Setup cost, $ 75 7 525

Total cost, $ 587

The total cost is $587

(b.) Part Period Balancing (PPB) Technique

Table 1: Inventory Summary

DEMAND ITEM VALUE

WEEK UNITS

1 17 HOLDING COST, $/UNIT/WEEK 1

2 0 SETUP COST, $ 75

3 24 LEAD TIME, WEEKS 2

4 39 BEGINNING INVENTORY, UNITS 32

5 45
NOTE: THE SAME FIGURES WILL BE USED FOR THE
6 26
TWO TECHNIQUES

7 13

8 31

9 18

Table 2: Material requirement Plan

Materials Week
Requirement
Plan 1 2 3 4 5 6 7 8 9

Gross 17 0 24 39 45 26 13 31 18
Requirements

Schedule
Receipts

Projected on- 32 15 15 39 0 26 0 31 0
hand

Net 0 0 9 0 45 0 13 0 18
requirements

Planned order 0 0 48 0 71 0 44 0 18
receipt

Planned order 48 0 71 0 44 0 18 0 0
release
Table 3: PPB Calculations

Periods Lot Size No. of Part period EPP Deviation Order (Unit)
Combined Periods

3 9 0 0 75 75-0 = 75

3,4 9+39 = 48 1 48-9*1*1 = 39 75 75-39 = 36 48

3,4,5 9+39+45 = 2 93-48*2*1 = 90 75 75-90 = -15

93

5 45 0 0 75 75-0=75

5,6 45+26=71 1 71-45*1*1= 26 75 75-26=49 71

5,6,7 45+26+13= 2 84-71*2*1= 58 75 75-58= 17

84

7 13 0 0 75 75

7,8 13+31= 44 1 44-13*1*1= 31 75 75-31= 44 44

7,8,9 13+31+18= 2 62-44*2*1= 26 75 75-26= 69

62

The total order is 4 units

Table 4: Total Cost

Total Inventory Cost, $ Per Unit Total Units Total Cost

Holding cost, $ 1 358 158

Setup cost, $ 75 4 300

Total Cost, $ 458

The total cost for PPB technique is $458

Table 5: Comparative Analysis

Total Inventory cost, $ Techniques

L4L PPB
Holding cost, $ 62 158

Setup cost, $ 525 300

Total Cost, $ 587 458

Minimum cost? No Yes