What factors affect the EOQ?

The Economic Order Quantity (EOQ) is a formula used to determine the optimal quantity of goods to order in order to minimize inventory costs. Several factors can affect the EOQ. One of the key factors is the carrying costs, which include costs related to storing, handling, and managing inventory. Higher carrying costs will lead to a lower EOQ, as the company would want to order fewer items to minimize these costs. Another factor is the ordering costs, which include costs associated with placing and processing orders. Higher ordering costs will result in a higher EOQ, as the company would want to order larger quantities to reduce the frequency of ordering and associated costs. Additionally, demand variability and lead time can impact the EOQ. Higher demand variability or longer lead times may result in a higher EOQ to ensure sufficient stock levels to meet demand.

This mind map was published on 16 January 2024 and has been viewed 77 times.