Economic Order Quantity
Economic Order Quantity (EOQ) is a fundamental inventory management concept that calculates the optimal order quantity to minimize total inventory costs, including ordering and holding costs. It is a mathematical model used in operations management and supply chain to determine the most cost-effective amount of inventory to order at one time, balancing the trade-off between ordering too frequently (high ordering costs) and ordering too much (high holding costs). This helps businesses reduce expenses and improve efficiency in inventory control.
Developers should learn EOQ when working on systems involving inventory management, supply chain optimization, or e-commerce platforms, as it provides a data-driven approach to inventory decisions. It is particularly useful in applications like warehouse management software, retail inventory systems, or logistics tools where minimizing costs and optimizing stock levels is critical. Understanding EOQ allows developers to implement algorithms that automate reorder points and quantities, enhancing operational efficiency in business applications.