EOQ model

1. Sachidananda roy
Id 142-11-3908

2. Topic: What is the necessity to use
EOQ model with non instantaneous
receipt?
EOQ(Economic order quantity)
The Economic order quantity is the amount of
inventory to be ordered at one time for purpose of
minimizing annual inventory cost.

4. Ordering cost
• Parching ordering cost.
• Transporting cost.
• Receiving cost.
• Inspecting cost.
• Store placement cost.

5. Carrying cost
• Storage cost.
• Handling cost.
• Insurance cost.
• Taxes cost.
• Determination & obsolescence cost.

6. Necessity of EOQ model
• Easy to compute non instantaneous receipt
quantity.
• Gives a good overall idea of costing.
• Does not require data that is hard to obtain
• Assumptions can be relax able .
• Can be starting point for more complicated
models

7. CHARACTERISTICS OF INVENTORY
SYSTEMS
1. Demand
2. Replenishment Lead Time
Rework time
1. Replenishment
• periodic or continuous
2. Excess demand
• backordered or lost
5. Changing Inventory
• obsolescence

8. Example of EOQ
 I am a buyer of coffeehouse. My needs 1000 coffee
makers per year. The cost of each coffee maker is
$78. Ordering cost is $100 per order. Carrying cost is
40% of per unit cost. Lead time is 5 days.
Coffeehouse is open 365 days/yr.
=$180
20.31$
100$10002 
EOQ

10. • The time require to receive and order is the
order quantity divided by the rate at which
the order is received and the amount of
inventory on hand is the order size minus the
amount dappled the receipt computed .