Question 136 - CPIM-Part-2 discussion

In a lean environment, the batch-size decision for planning ''A'' items would be done by lot-for-lot (L4L).A lean environment is a production system that aims to eliminate waste and maximize value by applying the principles and practices of lean manufacturing1.''A'' items are the most important items in an inventory system, based on the Pareto principle or the 80/20 rule, which states that 80% of the effects come from 20% of the causes2.Lot-for-lot (L4L) is an inventory ordering policy that orders exactly the quantity needed to meet the demand for each period3.

The reason why L4L is the preferred batch-size decision for planning ''A'' items in a lean environment is because it minimizes the inventory holding costs and reduces the risk of obsolescence or deterioration of the items3. L4L also supports the concept of pull production, which is a key element of lean manufacturing.Pull production is a method of controlling the flow of materials and information by producing only what is requested by the downstream customers or processes4. L4L aligns the production and consumption rates of ''A'' items, which are typically high-demand and high-value items, and avoids overproduction or underproduction. L4L also enables faster feedback and learning, as well as better responsiveness to customer needs and expectations.

The other options are not as suitable for planning ''A'' items in a lean environment.Least total cost is an inventory ordering policy that orders the quantity that minimizes the sum of ordering costs and holding costs5. However, this policy does not consider the demand variability or customer service level, and may result in large batch sizes that increase inventory levels and waste.Min-max is an inventory ordering policy that orders a fixed quantity whenever the inventory level falls below a minimum level6. However, this policy does not reflect the actual demand or consumption rate, and may result in excess inventory or stockouts. Periodic order quantity is an inventory ordering policy that orders a variable quantity at fixed time intervals. However, this policy does not synchronize the production and consumption rates, and may result in mismatched supply and demand.