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Economic Production Quantity (EPQ)

Understanding economic production quantity is important from the inventory management side of things because holding too much inventory is costly to carry and holding too little can incur stockouts, lost sales, and perhaps in rare cases production plant shutdowns (Wisner and Stanley, 2008).

Information about Economic Production Quantity (EPQ)

Profit maximisation is a central aim of any competitive organisation around the world. One of the ways firms strive to achieve this goal is to effectively use their resources and reduce costs related to production (Shamsi et al., 2009). Thus, understanding economic production quantity is important from the inventory management side of things because holding too much inventory is costly to carry and holding too little can incur stockouts, lost sales, and perhaps in rare cases production plant shutdowns (Wisner and Stanley, 2008: 192).

In this light, a fundamental task for organisations is to determine the quantity of a given item to order from suppliers to minimise overall inventory costs. One of the first attempts at devising a mathematical model to aid firms to achieve this came in the form of the economic order quantity (EOQ) model (Zipkin, 2000).

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