Inventory control techniques : Economic Order Quantity (EOQ)

This presentation provides a comprehensive overview of Economic Order Quantity (EOQ), is a fundamental concept in inventory and supply chain management. EOQ helps in businesses which determine the ideal order quantity that minimizes the total cost of inventory, including ordering and holding costs.

1. Economic Order Quantity (EOQ) Inventory Management Concept PRESENETD BY : DIPTI RANJAN PRADHAN SAMI AHEMAD KHAN GUIDED BY: MS. GUPTANJALI SAHU

2. TABLE OF CONTEXT

3. Introduction • EOQ is a fundamental concept in inventory management. • It determines the ideal order quantity that minimizes total inventory costs.

4. DEFINITION Economic Order Quantity (EOQ) is the ideal quantity a company should purchase to minimize total inventory costs. It aims to reduce shortage costs and order costs by providing a mathematical calculation for inventory orders.

5. KEY COMPONENTS 1. ORDERING COST :- EXPENSES INCURRED EACH TIME AN ORDER IS PLACED , SUCH AS ADMINISTRATIVE FEES,SHIPPING,HANDLING, AND THE COST OF PROCESSING ORDER. 2. HOLDING COST :- EXPENSES FOR STORING AND KEEPING INVENTORY,INCLUDING WAREHOUSE RENT,INSURANCE,STORAGE COSTS .

6. Assumptions of EOQ Model • Demand is known and constant. • Lead time is fixed. • Ordering cost and holding cost are constant.

7. EOQ Formula Formula: EOQ = Where: • D = Annual Demand (units per year) • PC = Procurement Cost(cost to place one order) • ICC = Inventory Carrying Cost(as % of unit cost) • UC = Unit Costs

8. Advantages of EOQ • Reduces total inventory costs. • Helps in efficient inventory planning. • Simple and easy to apply.

9. Conclusion • EOQ provides an optimal order size. • Helps minimize total inventory cost. • Useful for businesses with stable demand and costs.

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