
150 THE LEAN ANTHOLOGY
chosen to allow for regular usage plus some safety stock. The safety
stock should account for surges in demand as well as the length and
variability of the lead time required to receive the new order.
The amount to order depends on a few factors. Sometimes, this amount
is determined by past practice or by judgment. It can also be calculated
using a formula that helps determine what is called the economic order
quantity, or EOQ. We discuss the EOQ in greater detail in “Peter Goes
Shopping” in Chapter14. It is a fixed amount that typically does not
change, except perhaps after an annual review. The new order arrives
after ...