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Do larger batches save more setup cost than they add inventory cost?
Compare annual setup spending and cycle-stock carrying cost for two feasible lot sizes.
Example scenario
Editable demonstration inputs, not verified industry benchmarks. Enable JavaScript to calculate your own scenario.
- Annual unit demand
- 120,000
- Current batch size
- 1,000 units
- Proposed batch size
- 3,000 units
- Cost / setup
- $350
- Inventory cost / unit
- $20
- Annual inventory holding cost rate
- 25 %
Annual savings from proposed batch size
Example result only, not a forecast or promise.
- Current relevant annual cost
- $44,500
- Proposed relevant annual cost
- $21,500
- Additional average cycle-stock cash
- $20,000
What to do with this result
Validate shelf life, replenishment lead time and line capacity; the cycle-stock approximation assumes stable demand and instantaneous batch receipt.
Know what is inside the model.
Planning model, not personalized financial advice. Your inputs remain in your browser.
Calculation method
Annual relevant cost = annual demand / batch size × setup cost + batch size / 2 × unit inventory cost × holding rate.
Assumptions and limitations
- Example inputs are editable scenarios, not Aryo results or independently verified industry benchmarks.
- Recovered capacity is not booked revenue or automatic cash savings. Validate the bottleneck, quality and demand before monetizing output.