When demand is stable, increasing the lot size ordered will increase the amount of cycle inventory.

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BlackTom AI · Accepted Answer

To analyze the statement, we start from the concept of cycle inventory in inventory management under constant demand.
When demand is stable and in a steady-state system, cycle inventory is the portion of inventory that is built up during the production or ordering cycle and consumed as demand occurs. In practical terms, cycle inventory is typically proportional to the order quantity (lot size).
If you increase the lot size ordered while demand remains unchanged, you are increasing the amount of stock that must be held to cover the continuous consumption over the cycle. This directly raises the average level of cycle inventory in the system.
Put another way, larger orders create more stock that sits on the shelf while waiting to be sold, which translates to higher cycle stock. The relationship is linear under a constant demand rate: bigger Q means bigger cycle inventory, all else equal.
There are no hidden caveats in the statement about stability of demand that would negate this; stability simply ensures the proportional relationship holds over time, without surprises from fluctuating demand.
Therefore, the assertion that increasing the lot size ordered increases the amount of cycle inventory is true. It aligns with the standard decomposition of total inventory into cycle stock and safety stock (when present), with cycle stock rising in step with order quantity.

SP25-BL-BUS-P481-5624 11. Economies of Scale

When demand is stable, increasing the lot size ordered will increase the amount of cycle inventory.

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