what is economic order quantity eoq

what is economic order quantity eoq is a key concept in inventory management, representing the optimal order quantity that minimizes the total cost of inventory. The Economic Order Quantity (EOQ) is calculated using a formula that factors in demand, ordering costs, and holding costs. It is designed to determine the most cost-efficient quantity to order in each cycle, balancing the cost of placing orders and the cost of holding inventory. The EOQ model assumes constant demand and ordering costs, providing businesses with an efficient way to manage stock levels. By using EOQ, companies can avoid overstocking, which leads to excess storage costs, and understocking, which results in missed sales opportunities. The EOQ formula is used across industries, including manufacturing, retail, and e-commerce, to optimize inventory management practices and improve operational efficiency.