In inventory management, what does EOQ stand for?

Economic Order Quantity (EOQ) is a critical concept in inventory management that defines the optimal quantity of inventory to order that minimizes total costs. The model takes into account various factors such as ordering costs (the costs associated with placing and receiving orders) and holding costs (the costs related to storing unsold goods). By calculating the EOQ, businesses can determine how much inventory to order each time, reducing the frequency and total cost of orders while ensuring that they maintain adequate stock levels.

The EOQ model helps organizations strike a balance between having enough inventory to meet customer demand and minimizing the costs related to ordering and holding that inventory. This optimization is essential for effective inventory management, as it can significantly impact cash flow and overall operational efficiency.