6.3 Economic Order Quantity: Determining How Much to Order
The economic order quantity (EOQ) is one of the oldest and most widely known inventory control techniques. Research on its use dates back to a 1915 publication by Ford W. Harris. This technique is still used by a large number of organizations today. It is relatively easy to use, but it does make a number of assumptions. Some of the most important assumptions follow:
Demand is known and constant over time.
The lead time—that is, the time between the placement of the order and the receipt of the order—is known and constant.
The receipt of inventory is instantaneous. In other words, the inventory from an order arrives in one batch, at one point in time.
The purchase cost per unit is constant ...
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