Comments on: So, what’s so wrong with EOQ?

By: Lawrence Loucka

Lawrence Loucka — Tue, 22 Dec 2009 19:31:43 +0000

Tolani, the EOQ formula “blows up” when the cost to place an order (or set up a machine)goes to zero. In the lean world we work toward single piece flow. We take hour long machine or process changeovers and find ways to get them done in minutes. When changeovers are minutes EOQ is irrelevant. EOQ Thinking usually goes in the other direction – it helps people justify large batches.

By: Tolani

Tolani — Tue, 22 Dec 2009 13:59:48 +0000

what are the limataion of eoq.

By: Lean Sigma Supply Chain » EOQ Slide Rule

Lean Sigma Supply Chain » EOQ Slide Rule — Sat, 04 Jul 2009 23:39:39 +0000

[...] scientists old enough to have been in college before say 1976 will appreciate the beauty of this Economic Order Quantity Slide [...]

By: Lean Sigma Supply Chain » Cutting off the tail

Lean Sigma Supply Chain » Cutting off the tail — Mon, 09 Mar 2009 02:06:18 +0000

[...] Economic Order Quantity, often abused. [...]

By: sharkong

sharkong — Wed, 21 Feb 2007 17:47:08 +0000

yeah~ your answer is very useful. Thanks a lot
However, such data is a confidential information, i’m just a student,
how can i obtain such infromation in a more easy way? such as internet, library ?

Anyway, thank for your answering!!! i just guessing will you reply me!! It’s really fun :)

By: Lawrence Loucka

Lawrence Loucka — Wed, 21 Feb 2007 13:49:58 +0000

Sharkong,

Q is the annual sales quantity. This can be history or forecast. For each item how many are you going to sell?

P is the cost to order or buy more product including shipping, salary for purchasing department. How many purchasing people? How many purchase orders do they make every year? Figure out how much it costs to make one purchase order.

C is the cost to hold the stock. What is the cost of the product? What is the cost to borrow money or interest rate. What is the cost for the warehouse and all the people who move, count, inspect the product?

Does this help?

By: sharkong

sharkong — Wed, 21 Feb 2007 06:54:34 +0000

i am doing a report, topic called” how EOQ can be applied in the retail market nowsdays”. i just found the theory support , but i can’t find the real data support me . i wanna through ”pull and push” system to explain the degree of aopting EOQ model in retail industry. If i need to find the data, which sort of data i need to find ? My assumption, that’s found out the real EOQ of one or two of the products, and comparsion with the store actual order quantity, and find that the different. could you help me solve my foolish questions? thanks

By: Lawrence Loucka

Lawrence Loucka — Sun, 16 Apr 2006 20:26:54 +0000

Alice,

Assuming your numbers are correct:

a.
EOQ = square root of (2 * 75000 * 8.00) / 12.00
EOQ = square root of 100,000
EOQ = 316

b.
# orders per year = 75000/EOQ = 237, but this could be way off. How many stores? What do you know about the demand; flat, growing, noisy or stable?

c.
Average inventory – can’t answer that without knowing how many stores, starting inventory, safety stock, supplier lead time, supplier minimum order quantity, etc. At first blush I’d say it won’t be much, could be just a few days worth.

d.
Total cost of ordering = 316 * 8 = $2528.
Total cost of inventory carrying cost (see c.)

And by the way, who is Fisk?

By: Alice

Alice — Sun, 16 Apr 2006 19:55:59 +0000

Please can you help me with this problem, I am not able to solve it? Many Thanks

Ponders Corp., is trying to improve its inventory control system and has installed an on-line computer at its retail stores. Fisk anticipates sales of 75,000 units per year, an ordering cost of $8 per order, and carrying costs of $12.0 per unit.

a. What is the economic ordering quantity?
b. How many orders will be placed during the year?
c. What will the average inventory be?
d. What is the total cost of ordering and carrying inventory