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Economic Order Quantity (EOQ) is a formula used by businesses to determine the optimal order quantity that minimizes total inventory costs, which include ordering costs and holding costs. By calculating EOQ, businesses can ensure they don’t overstock or understock their inventory, leading to cost savings. The EOQ calculation helps determine the ideal order quantity, taking into account factors such as demand, ordering cost, and holding cost.

To calculate EOQ, the formula is:

EOQ = √(2DS/H)

Where:

D = Demand rate (units per year)

S = Ordering cost per order

H = Holding cost per unit per year

By using this formula, businesses can efficiently manage their inventory, reduce unnecessary expenses, and maintain optimal stock levels, improving overall supply chain management. Cloud-based ERP systems can automate EOQ calculations to streamline operations.

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entartes4

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6mo ago

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