Economic Order Quantity (EOQ)

The economic order quantity is the optimal order quantity for an item of stock that minimises cost (Lysons and Farring-ton, 2006).

Information about Economic Order Quantity (EOQ)

One way that organisations aim to maximise profits is by effectively utilising resources and minimising production-related costs (CIPS Australia, 2007; Monczka et al., 2009; Shamsi et al., 2009). In terms of operations management and supply chain management, a key challenge lies in assessing and forecasting the quantity of a given item to order from suppliers. One of the earliest mathematical models aimed at helping companies to minimise overall inventory costs was developed by F.W. Harris (and applied extensively by R.W. Wilson) and is known as the economic order quantity (EOQ) or Wilson formula (Zipkin, 2000).

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