This refers to an inventory management technique for determining the optimum quantity of goods to order to maintain adequate inventory levels.
EOQ balances the cost of ordering, the rate of demand, the lead team for receipt of goods, the purchase and delivery price of the goods and their storage costs. It provides a model for calculating the appropriate reorder point and optimal reorder quantity to avoid any shortages.
The economic order quantity is a term normally found in financial management and management accounting.
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