Economic Order Quantity

Economic order quantity (EOQ) is the ideal order quantity a company should purchase to minimize inventory costs such as holding costs, shortage costs, and order costs. This production-scheduling model was developed in 1913 by Ford W. Harris and has been refined over time. The formula assumes that demand, ordering, and holding costs all remain constant.The EOQ is a company's optimal order quantity that minimizes its total costs related to ordering, receiving, and holding inventory.The EOQ formula is best applied in situations where demand, ordering, and holding costs remain constant over time.

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