A fundamental inventory management model called Economic Order Quantity is used to identify the ideal order quantity that minimizes the overall cost of inventory, including ordering and holding expenses. EOQ assists companies in avoiding placing excessive orders at once, which raises carrying costs, or placing too many orders at once, which raises administrative and shipping expenses. Although it is simplified, the traditional EOQ formula provides useful information for maximizing order frequency and lot sizes since it makes the assumption that demand and lead time are constant. EOQ is frequently modified in modern systems to account for real-world constraints, fluctuating lead times, and dynamic demand.
