Do you have too much overall inventory while experiencing stock-out situations? One culprit may be your system EOQ setting.

  • Joong Hyun
Keywords: Operations improvement, Lean, Inventory Management, EOQ


Optimal EOQ determination is a classic case of a compromise between a set of conflicting elements.  When used properly, EOQ makes the proper balance between the costs associated with processing orders (which provides motivation to order large quantities at a time) and the inventory holding costs (which in contrast provides motivation to order as little as possible at a time).  In this article, practical and real-life considerations are presented to highlight common mistakes in applying the EOQ formula found in text books.


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