Economic Order Quantity (EOQ)

Economic Order Quantity (EOQ) is a formula used by businesses to determine the optimal amount of inventory to order. The goal is to minimize the total costs associated with ordering and holding stock. By calculating EOQ, companies can balance the costs of ordering too frequently (which increases shipping costs) against the costs of storing excess inventory (like rent or spoilage). Essentially, EOQ helps businesses find the most cost-effective quantity to purchase so they can operate efficiently and reduce waste.