Economic Order Quantity


The economic order quantity model is particularly beneficial for small business owners and warehouse managers who want to review their inventory systems in order to reduce costs and maximise profits. This concept will help you evaluate advantages and disadvantages of this inventory model before implementing it.

Technique Overview

Economic Order Quantity Definition

Economic order quantity (EOQ) is the most economical “stock replenishment order size, which minimises the sum of stock ordering costs and stockholding costs. EOQ is used in an 'optimising' stock control system” (CIMA, 2005).

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Business Evidence

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Examples of Economic Order Quantity *

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Business Application

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Success Factors of Economic Order Quantity *

Measures of Economic Order Quantity *

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Further Reading

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Economic Order Quantity References (4 of up to 20) *

  • Billington, C., Callioni, G., Crane, B., Ruark, J.D., Rapp, J.U., White, T. and Willems, S.P. (2004) Accelerating the Profitability of Hewlett-Packard's Supply Chains. Interfaces, Vol. 34(1), pp. 59-72.
  • Bixby, A., Downs, B. and Self, M. (2006) A Scheduling and Capable-to-Promise Application for Swift & Company. Interfaces, Vol. 36(1), pp. 69-86.
  • Bossert, J.L., Blank, A. and Margetson, B. (2004) Basic Issues: Supplier Rating. In J.L. Bossert (Ed.) The Supplier Management Handbook. American Society for Quality. Quality Press: Milwaukee.
  • Brigham, E.F. and Ehrhardt, M.C. (2008) Financial Management. Thomson South-Western: Mason, OH.

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