Lead time is the period of time from which a order for goods is placed until it is received by the store. Lead time is an important consideration for determining when orders should be placed.
A inventory should be taken at least once a year. If items are perishable, seasonal or highly demanded a inventory should be taken more often.
The EOQ formula is the square root of 2 times demand times order completion cost divided by carrying cost. The mathematical formula is square root of 2DS/C.
There are two types of forecasting qualitative and quantitative. Qualitative uses personal opinions to determine forecasts. Quantitative uses numerical data and statistical modeling to determine forecasts.
Demand is the quantity that customers are willing to buy. Demand can be found through forecasting and is needed to find the EOQ level.
Yes, through the use of forecasts inventory levels can be set to meet the demands while keeping levels as low as possible.
Yes, in order to compare stock costs when using the EOQ model you must compute the costs for both the original level and the EOQ level of order quantities.
Yes, a discount will cause the basic EOQ model to fail. To use a discount in determine a EOQ you must use the EOQ model with quantity discounts.
The letters in the formulas represent the quantity ordered(Q), the carrying cost of a unit(C), the demand for the units(D) and the cost of completing a order(S).
If there is no savings a error in the calculations may have occurred or the model does not fit your case. For instances were the total stocking costs are even you may use either order quantity.