Definition
U-curve optimization is used in determining the optimal batch size. It is done by balancing transaction cost and holding cost. It is illustrated by a graph that displayes three qualities, namely: Transaction Cost, Holding Cost and Total Cost. The y-axis represents cost, and the x-axis is batch size. By adding together the Transaction Cost and Holding Cost for a batch size, we can calculate the Total Cost. The goal overall is to determine the lowest possible Total Cost.
Further Reading
- “Determination of Optimal Batch Size for a Manufacturing System”(book), by Ruhul Sarker and Charles Newton.
- For more on U-curve optimization , read here and here.