Calculate EOQ Without Worshiping It
Use EOQ as a starting point and then challenge its assumptions for warehouse reality.
A gasket sells 2,400 units per year. Each purchase order costs about $45 to place and receive. Holding cost is estimated at $1.30 per unit per year. The current order quantity is 1,000 units, creating 18 weeks of cover. EOQ balances ordering cost against holding cost, then operations checks the answer against real constraints. Treating EOQ as exact hides supplier multiples, shelf capacity, lead-time risk, and demand volatility. Before Order 1,000 units because the supplier discount looks attractive; carry excess cartons in a reserve aisle. After Calculate EOQ near 408 units, round to a practical 360-unit three-carton order, and review…
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