Consider a manufacturer that uses the economic production lot size (ELS) model. What must be the relationship be between production rate and demand rate for the producer to spend double the time in the production and demand portion of the inventory cycle than they spend in only the demand portion of the inventory cycle?

Question

Quizplus · Accepted Answer

In the economic production lot size model, the time spent in both production and demand phases is double the time spent in only the demand phase when the production rate (p) is 1.5 times the demand rate (d). This is because the inventory builds up faster than it is depleted, allowing for a longer cycle time before production needs to restart.

Consider a Manufacturer That Uses the Economic Production Lot Size