Despite its limitations, the EOQ model remains a vital financial tool to help optimize inventory and reduce associated costs.
Economic Order Quantity (EOQ) is the theoretically ideal amount of goods that a company procures to minimize its stock costs.
The EOQ assumes that the prices of ordering, ordering, and holding are consistent over time.
Critics have argued that assumptions of constant demand and constant load levels are a limitation of the EOQ model. For example, in many companies, seasonal adjustments in demand occur and prices can vary over time.
Erlenkotter, Donald. ” Ford Whitman Harris and the order quantity business model. ” Operations Research, vol. 38, no. 6, 1990, pp. 937-946.
Goyal, Suresh Kumar. ” An economic order amount is allowed in situations of overdue payment. ” Journal of the Society for Operations Research, vol. 36, no. 4, 1985, pp. 335-338.