What are the benefits of using EOQ?

The Economic Order Quantity (EOQ) model is a widely used inventory management technique that helps businesses determine the optimal order quantity that minimizes costs while meeting customer demand. The main benefits of using EOQ include reducing inventory holding costs, minimizing order and setup costs, and preventing stockouts. By calculating the optimal order quantity, businesses can avoid overstocking, which ties up a considerable amount of capital and increases carrying costs. EOQ also helps in reducing order and setup costs by determining the ideal number of orders to be placed during a given period. Furthermore, it aids in preventing stockouts, as businesses can establish a balance between ordering enough inventory to meet demand, while avoiding excessive inventory that can lead to shortages. Overall, implementing EOQ enables businesses to enhance their inventory management efficiency, reduce costs, and maintain customer satisfaction.

This mind map was published on 16 January 2024 and has been viewed 204 times.