21. The New Sustainable EOQ Formula

The Economic Order Quantity (EOQ) is the amount needed to be ordered to minimize the variable cost. The EOQ formula looks only at the activity on the plant floor or in the distribution area. This chapter takes this formula to a new dimension. It expands the horizon of the EOQ formula to the entire supply chain and into the sustainable age of Green. The EOQ is the amount of inventory purchased that will balance the ordering and holding costs. Inventory is composed of the following parts:

• Raw materials and purchased parts from outside suppliers.

• Components and subassemblies that are awaiting final assembly.

• Work in process, which is all materials or components on the production floor in various stages of ...

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