Economic Order Quantity

Economic Order Quantity (EOQ) is a formula that helps businesses determine the ideal number of inventory units to order each time, balancing ordering costs (like processing and delivery) with holding costs (like storage and insurance). The goal is to minimize total costs associated with ordering and storing inventory, ensuring that stock levels meet customer demand without unnecessary expenses. By calculating EOQ, companies can avoid ordering too often (which increases costs) or ordering too much at once (which increases storage costs), leading to more efficient inventory management and cost savings.