One issue that comes up in planning and especially in the use of MRP that I haven't seen a lot of good research on is how to model and determine optimal minimum order quantities. This is important as many manufacturers do not have infinite capacity, and is very constrained in low volume high mix environments. I've read various accounts on economic order quantities being outdated. What is the current thinking on the best method to model optimal minimum order quantities?
Just to clarify the terminology that I am using the following: the EOQ (economic order quantity) is a quantity decided by the client, the MOQ (minimal order quantity) is a quantity imposed by the supplier. Here, my understanding is that the question is oriented toward EOQs (my answer below); but I am wondering if it's not about picking the right MOQs to impose to clients (which is another problem entirely).
The "mainstream" methods approach EOQs, especially all of those that promise any kind of optimality suffer from a series of problems:
Do not expect a formula for EOQs. There isn't one. A satisfying answer requires a way "to factor in" all those elements. What we have found at Lokad for better EOQs in manufacturing (not "optimal" ones, I am not even sure we can reason about optimality), is that a certain list of ingredients are needed:
In my series of supply chain lectures, I will be treating (probably somewhere next year) the fine print of MOQs and EOQs in my chapter 6. For now, the lecture 6.1 provides a first intro into the main ingredients needed for economic order optimization, but without delving (yet) into the non-linearities:
https://tv.lokad.com/journal/2022/5/12/retail-stock-allocation-with-probabilistic-forecasts/
It will come. Stay tuned!