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 exactly the same time in the production and demand portion of the inventory cycle as they spend in only the demand portion of the inventory cycle?

Question

Quizplus · Accepted Answer

For the producer to spend exactly the same time in the production and demand portion of the inventory cycle as they spend in only the demand portion, the production rate (p) must be twice the demand rate (d), hence p = 2d. This is because, during the production phase, both production and consumption are happening simultaneously, requiring the production rate to be higher to maintain the balance.

Consider a Manufacturer That Uses the Economic Production Lot Size