Economic order quantity, or EOQ, is a model that estimates the order size that balances ordering cost and inventory holding cost under stated assumptions. The basic model assumes stable demand and replenishment.
How should a business apply Economic Order Quantity (EOQ)?
Use current demand, ordering cost and holding-rate inputs, then test how the answer changes when demand, lead time, minimums or freight breaks vary.
What records support Economic Order Quantity (EOQ)?
Keep the formula, input sources, calculation date, constraints and approved operating quantity.
Economic Order Quantity (EOQ): what the sourcing record should show
| Area | What to record |
|---|---|
| Decision | Use current demand, ordering cost and holding-rate inputs, then test how the answer changes when demand, lead time, minimums or freight breaks vary. |
| Evidence | Keep the formula, input sources, calculation date, constraints and approved operating quantity. |
| Watch point | EOQ is a planning aid, not a supplier term. Volatile demand, stockout cost and container economics can justify a different order size. |
What is a common Economic Order Quantity (EOQ) mistake?
EOQ is a planning aid, not a supplier term. Volatile demand, stockout cost and container economics can justify a different order size.
