Lotting Strategy Definition

A lotting strategy is a plan for how products will be grouped together in lots or batches for production. The goal of a lotting strategy is to minimize the cost of inventory and production while still meeting customer demand.

There are many factors to consider when developing a lotting strategy, including the type of product, the production process, lead time, and desired inventory levels. The most important factor is often the balance between cost and customer service.

For example, if lead time is short and customer demand is high, it may be more expensive to produce smaller lots more frequently. However, this could lead to higher levels of customer satisfaction as orders are filled more quickly.

Conversely, if lead time is long and customer demand is low, it may be more cost-effective to produce larger lots less frequently. This could lead to lower levels of customer satisfaction as orders take longer to fill.

The right lotting strategy will vary depending on the specific products and needs of the business. There is no one-size-fits-all solution; each business must carefully consider its own needs before developing a plan.