Economic Order Quantity (EOQ) Inventory

Industrial & Systems Engineering

How It Works

The classical Harris-Wilson Economic Order Quantity (EOQ) model determines the optimal purchase batch size that minimizes total annual inventory management costs. By balancing fixed transaction order costs against linear holding costs of carrying inventory, total cost calculus yields a minimum at the intersection of ordering and holding curves, forming a continuous sawtooth inventory cycle.

Governing Equation
TC(Q) = (D / Q) · S + (Q / 2) · H  |  Q* = √[(2 · D · S) / H]