Economic Order Quantity 3.0

The Economic Order Quantity (EOQ) aims to optimize inventory management by balancing total inventory holding costs and ordering expenses.

EOQ is most applicable under conditions where product demand remains stable over a specific period and orders are fulfilled completely upon reaching a zero inventory level.

It considers a fixed order cost incurred with each order, independent of the order quantity, as well as a holding cost, which is often expressed as a percentage of the purchase price per unit and accounts for storage, insurance, and depreciation expenses.

Employing EOQ enables organizations to determine the most efficient order size that minimizes the combined costs of purchasing, delivery, and storage, thereby supporting more effective inventory control.