👉 Rice math, also known as the Rice equation or the Rice formula, is a simple yet powerful tool used in operations research and management science to estimate the cost of inventory replenishment. It helps determine the optimal order quantity by balancing holding costs (costs associated with storing inventory) and ordering costs (costs incurred each time an order is placed). The formula is: Q = √(2DS/H), where Q is the order quantity, D is the annual demand, S is the ordering cost per order, and H is the holding cost per unit per year. This equation suggests that the ideal order size is proportional to the square root of the product of demand, cost per order, and inverse of holding cost. Adjusting this formula can account for various factors like lead time variability or safety stock, making it a versatile method for inventory management.
