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What is it: Economic Order Quantity (EOQ) is that level of inventory that minimizes the total of inventory holding cost and ordering cost. EOQ is the order quantity that minimizes of the cost of ordering and the cost of holding inventory.

Why use it: EOQ is useful in determining optimal order quantity, that minimizes total variable costs required to order and hold inventory.

Where to use it: Basically, EOQ helps you identify the most economical way to replenish your inventory by showing you the best order quantity.

When to use it: The EOQ tool can be used to model the amount of inventory that we should order each month.

How to use it: There are primarily two ways to implement EOQ. Both methods obviously require that you have already determined the associated costs. The simplest method is to set up your calculation in the attached excel spreadsheet program, manually calculate EOQ one item at a time, and then manually enter the order quantity into your inventory system. If your inventory has fairly steady demand and costs and you have less than one or two thousand SKUs you can probably get by using this method once per year. If you have more than a couple thousand SKUs and/or higher variability in demand and costs you will need to program the EOQ formula into your existing inventory system. This allows you to quickly re-calculate EOQ automatically as often as needed. You can also use a hybrid of the two systems by downloading your data to a spreadsheet or database program, perform the calculations and then update your inventory system either manually or through a batch program. 


  Name
Format
Preview (Click to enlarge)
  Economic Order Quantity Template
Microsoft Excel Format
Microsoft Excel
Format
Economic Order Quantity Template
  Economic Order Quantity Completed Example
Microsoft Excel Format
Microsoft Excel
Format
Economic Order Quantity Completed Example
USD $9.95
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