I hope that you have enjoyed the article “Purchasing & Inventory Management Hook Up!” As promised in that article, here’s the EOQ formula:

Where:

EOQ = Economic Order Quantity

ACPO = Acquisition Costs Per Order

AUU = Annual Usage in Units

UC = Unit Cost

CCP = Carrying Cost Percentage

So, if you know that it costs you $150 in overhead per order, you use 5,000 widgets a year, you pay $200 per widget, and your Finance Department tells you that annual carrying costs are equal to 20% of the value of the goods in stock, you should order…

Drumroll, please.

194 widgets at a time.

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Recommended Reading

• Impact of Inventory
• Inventory Purchasing
• Profitable Inventory Management and Control
• Inventory Turnover Ratio
• Purchasing and Inventory Management
• Myth: Learning Inventory Management Is Painful

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