Economic Order Quantity FAQ
When to use EOQ?
Generally speaking, the EOQ formula is best used in scenarios where demand, ordering, and holding costs remain the same (or constant) over time. When these numbers fluctuate, it can be helpful to automate your EOQ calculations to ensure accuracy and ease of computing.
How often should I calculate EOQ?
The EOQ model helps guarantee the right amount of inventory is ordered per batch, meaning companies don’t have to order too frequently and don’t have excess inventory sitting around. The regularity of EOQ calculations will vary depending on a brand’s unique consumer demand.
What is the business application of EOQ?
The business application of EOQ falls within inventory management — that is, overseeing all aspects of a product’s ordering, storing, and use. With EOQ, ecommerce sellers are able to reduce their total inventory costs, as both order and holding costs are effectively minimized.
What is the best tool to calculate EOQ?
An EOQ calculator is perhaps the best tool to figure out economic order quantity, since it alleviates the need for manual calculations. These calculators will still require you to plug in your order costs, annual demand, and holding costs, but then they'll run the numbers on your behalf.