Sunday, October 2, 2011

Economic Order Quantity and Minimum Order Quantity

We all know about economic order quantity (EOQ), which is a balance of fixed order cost and the cost of holding inventory.One however, may not be able to order exactly the economic order quantity all the time. We know that small changes to EOQ does not affect fixed and holding cost significantly, but holding cost depends on cost of product. Changing the minimum order quantity, or sometimes called order multiples (or other names) can reduce supply chain costs. My team came in 3rd! hurray! :)


http://www.themsj.com/around-ross/spotlight-on-the-tauber-institute-1.2596618


What is even more interesting it, should EOQ be calculated along the supply chain? Can we relate costs, lead time and the push-pull boundary for companies to differentiate themselves?



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