What is EOQ?▾
Economic order quantity is the order size that minimises the total of ordering costs and holding costs for an item with steady demand.
How do I estimate holding cost?▾
Add storage, insurance, shrinkage and the interest cost of money tied up in stock. A common estimate is 20–25% of the item's cost per year.
When is EOQ not suitable?▾
When demand is highly seasonal, suppliers offer quantity discounts, or items are perishable. Adjust the order quantity for those constraints.
What is a reorder point?▾
The stock level at which you place the next order, so the new stock arrives just as the safety stock is reached.
