The EOQ Inventory Formula James M. Cargal Mathematics Department Troy University – Montgomery Campus A basic problem for businesses and manufacturers is‚ when ordering supplies‚ to determine what quantity of a given item to order. A great deal of literature has dealt with this problem (unfortunately many of the best books on the subject are out of print). Many formulas and algorithms have been created. Of these the simplest formula is the most used: The EOQ (economic order quantity) or
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ECONOMIC ORDER QUANTITY (EOQ) MODEL The economic order quantity (EOQ) is the order quantity that minimizes total holding and ordering costs for the year. Even if all the assumptions don’t hold exactly‚ the EOQ gives us a good indication of whether or not current order quantities are reasonable. What is the EOQ Model? Cost Minimizing “Q” Assumptions: Relatively uniform & known demand rate Fixed item cost Fixed ordering and holding cost Constant lead time (Of course‚ these assumptions don’t always
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Q 1. EOQ and MOQ are supplier-related terms‚ where EOQ shows the costs a supplier has that are associated with purchasing goods and MOQ shows the amount of goods required for purchase to pass on to the supplier’s customers. EOQ - Economic Order Quantity EOQ is basically an equation used to determine inventory stock. It figures the ideal quantity to order that a particular supplier should maintain in warehouse‚ determined by a consistent cost for production‚ demand‚ etc
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with the theme Supply Chain Management concerns all the movements of products and the use of resources within a company. It deals with planning and decision making. For the long term (aggregate planning level) as well as the short term you must be able to identify‚ plan and measure input and output in any planning process within a company. Planning can be used for all kinds of resources inside or outside a company. 3. Objectives The student will be able to make planning decisions on basis of
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Q.1a) The following graph is EOQ model with planned shortages. Let the parameters from the basic EOQ model. d = constant demand rate K = setup cost for placing one order Q = order quantity h = inventory holding cost per unit of product per unit of time p = shortage cost per unit of product per unit of time S = inventory level just after an order of size Q arrives So‚ Q– S = Shortage in inventory just before an order of Q units is added Production or ordering cost per
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Economic Order Quantity vs. Just-in-time Inventory Models Bettina Bradshaw Susan Day Tameka S. Levy Accounting April 20‚ 2011 There are several models that have been developed to deal with the trade-off between ordering and carrying costs of inventory. The two that will be discussed is the Economic Order Quantity (EOQ) model and the Just-in-time (JIT) model. First‚ the history and definition of the theories will be discussed. Secondly‚ there will be a comparison of these two models presented
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EOQ INVESTIGATION. PAPER. ECONOMIC ORDER QUANTITY (EOQ) An Economic Order Quantity is the optimal number of order that minimizes total variable costs required to order and hold inventory‚ that is to say‚ that EOQ helps us to determine the appropriate amount and frequency when ordering and holding inventory. EOQ is used as part of a continuous review inventory system‚ in which the level of inventory is monitored at all times‚ and a fixed quantity is ordered each time the inventory level reaches
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Topps Company Inventory Evaluation Michelle Rowley ACC 281 Ms. LaKeitha Givens August 5‚ 2013 Topps Company Inventory Evaluation Topps Company’s runs two business units‚ confectionery and entertainment (Edmonds‚ Olds‚ McNair‚ & Tsay‚ 2010). Their financial situation changed from the year 2004 to the year 2006. Their focus changed in 2006 with 80% of the employees reporting profit and loss to someone compared to 20% reporting before the change and also started performance tracking of
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Consulting CASE STUDY Best Practices in Inventory Management K. Ravichandran Debjyoti Paul A leading consumer products company dealing in cosmetics and other personal care products was seeking ways to: Reduce inventory levels across their forward supply chain Improve Inventory Record Accuracy at their storage points Accurately track damaged goods at various points in the supply chain The above problems together were a significant burden to the company. Implementation of best practices after
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Economic Order Quantity EOQ‚ or Economic Order Quantity‚ is defined as the optimal quantity of orders that minimizes total variable costs required to order and hold inventory. Every company worries about two things when deciding how to manage their inventory. How much should we order? And how often should we order? These represent variables that come with their own changing costs. The Economic Order Quantity‚ or EOQ‚ is that magic number that represents the optimal quantity of orders that
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