ANALYSIS FOR CONTROL
The scope for analysis is suggested by recognition of the possibility of two situations in
which optimisation may be undertaken. The first will arise when the cost involved in
procuring stock is compared with the cost of holding that stock. At one extreme,
frequent orders or set-ups will result in low average stock levels, whereas with infrequent
orders or set-ups stock levels must on average be high if shortages are to be
avoided; this obviously involves consideration of lot-size inventory. Fluctuation in
demand is the reason for the second optimising situation which arises in consequence
of the trade-off between investment in stock and the cost of a shortage.