Hello,
I have a blog with information on reorder dates. I have a few
posts that discuss EOQ.
This is my post from Feb 28th,
2008(http://excelevolution.wordpress.com/2008/02/28/eoq-economic-order-quantity/)
I hope this information will be somewhat useful to you. The EOQ
(Economic Order Quantity) is the most cost effective amount to
order each time stock needs to be replenished. EOQ is, for all
intents and purposes, an accounting formula that determines the
point at which the combination of order costs and inventory
carrying costs are the least. In purchase-to-stock scenarios, this
is known as the order quantity and in make-to-stock manufacturing
situations, known as the production lot size. While the EOQ may not
be relevant in every inventory situation, most companies will find
it beneficial in at least some aspect of their operation. The
optimal EOQ result in this table does not affect the EOQ section in
the main part of the algorithm and may benefit from some
adjustment. The rationale for this is that the optimal EOQ is just
the mathematical figure. Please read the EOQ notes at the base of
the algorithm to get an idea of how the optimal EOQ can be further
refined by taking into account other factors. Once established,
this 'corrected' figure can be put into the 'Number of pallets
(units) per container (EOQ)' section. The EOQ notes are as follows:
*The optimal EOQ will be further refined by taking into account the
following factors: If the number of units is too large, these
issues may arise: Additional storage space requirements, financial
outlay may be too high, risk of spoilage, risk of obsolescence,
lost opportunities with invested capital, higher insurance costs
& more inventory available to be stolen & damaged. If the
number of units is too small, these issues may arise: Inability to
benefit greatly from current pricing, quantity discounts may not be
offered, more risk of damage whilst in transit if not full
multiples, shipping & receiving costs per unit may be higher.
Cheers, Peter Phillips
