Lean Strategies International
Menu

Glossary

Would you like to add a term to the community? Click Here!

Economic Order Quantity

1/26/2023

0 Comments

 
Economic Order Quantity
Click on the Photo to Visit our Training Page!
​  The Economic order quantity or EOQ is the ideal, or most “economic” quantity of units that should be purchased or ordered, to meet demand while simultaneously attempting to minimize the costs of carrying inventory, ordering inventory and stocking out of inventory.
Click Here to Subscribe to Our YouTube Channel.
​  The EOQ model is that of a fixed order model.  In other words the formula can be used to establish a quantity that will give a person guidance pertaining to how much of any one item they should buy or manufacture.  Its purpose is so that companies can minimize the costs of acquiring and carrying inventory while still balancing the needs of demand. 
Ford Whitman Harris
Ford Whitman Harris Created the EOQ Model in 1913.
History​
  • It’s been said that "the model was first developed in 1913 by Ford W. Harris" and has been refined many times over throughout the years. 
Assumptions
  When using the EOQ model there are a few assumptions that you must build your model with in mind: 
  1. The first is that Your demand is somewhat constant. 
  2. Next, you must keep in mind that Your costs related to inventory and ordering are constant and known.  Or, they can be pulled from some data stored somewhere. 
  3. Your replenishment or production occurs all at once or in batches rather than in a continuous manner. 
Summary
  That's a lot of information in a very short section, so let's look at some key takeaways before moving on to more.  When answering the question, what is EOQ?  You can say, The economic order quantity (EOQ) is a company's optimal order quantity that meets demand while minimizing its total costs related to ordering, holding, and stocking out of inventory.  Next, when should we consider The EOQ formula?  EOQ is best applied in situations where demand, ordering, and holding costs are relatively constant with very little peaks and valleys over time. 
Click Here to Visit Our Training Page!
0 Comments

Your comment will be posted after it is approved.


Leave a Reply.


    Glossary


    Subscribe below and receive lean, six sigma, operations, supply chain, logistics, distribution and business terms in your mailbox.

    CLICK HERE TO SUBSCRIBE

    Categories

    All
    #
    01. Add A Term
    3D
    3PL
    3P's
    5 Principles
    5S
    5 Why's
    6σ
    8 Wastes
    A
    B
    C
    D
    E
    F
    G
    H
    I
    J
    K
    L
    M
    N
    O
    P
    Q
    R
    S
    T
    U
    V
    VSM Shapes
    W
    X
    Y
    Z

    Archives

    January 2023
    December 2022
    November 2022
    October 2022
    September 2022
    August 2022
    July 2022
    June 2022
    May 2022
    April 2022
    March 2022
    February 2022
    January 2022
    December 2021
    November 2021
    October 2021
    September 2021
    August 2021
    July 2021
    June 2021
    May 2021
    April 2021
    March 2021
    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    September 2020
    August 2020
    July 2020
    May 2020
    April 2020
    March 2020
    November 2019
    October 2019
    August 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018
    March 2018
    February 2018
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    November 2015

Lean Strategies International LLC.
Follow Us on YouTube or Our Other Channels Below.
             ©2015-2021 Lean Strategies International LLC.  
  • Home Page
  • Services
    • Training >
      • Waste Training
      • Introduction to Lean
      • Lean Champions >
        • Lean Six Sigma White Belt
        • Lean Six Sigma Yellow Belt
      • Lean Tools You Can Use Series! >
        • The 5S System
        • The ©Gemba Methodology
        • The FISH Methodology
        • The CURE Methodology
        • Quick Changeover with REDUCE
        • Mistake Proofing and the Poka Yoke System
        • The Just in Time System
  • Lean Resources
    • Listen to The Gemba
    • Glossary
    • Lean and Six Sigma Quotes
    • Recommended Reading
    • Events
    • Masters of Lean and Six Sigma
    • Career /Jobs
  • Store
    • Workspace
  • Home Page
  • Services
    • Training >
      • Waste Training
      • Introduction to Lean
      • Lean Champions >
        • Lean Six Sigma White Belt
        • Lean Six Sigma Yellow Belt
      • Lean Tools You Can Use Series! >
        • The 5S System
        • The ©Gemba Methodology
        • The FISH Methodology
        • The CURE Methodology
        • Quick Changeover with REDUCE
        • Mistake Proofing and the Poka Yoke System
        • The Just in Time System
  • Lean Resources
    • Listen to The Gemba
    • Glossary
    • Lean and Six Sigma Quotes
    • Recommended Reading
    • Events
    • Masters of Lean and Six Sigma
    • Career /Jobs
  • Store
    • Workspace