Supply Chain Glossary - E

economic lot size also economic order quantity

Syn: economic order quantity.

A type of fixed order quantity model that determines the amount of an item to be purchased or manufactured at one time. The intent is to minimize the combined costs of acquiring and carrying inventory. The basic formula is <br><center><img border="0" src="eoq.gif"><br></center> where d = annual demand, c = average cost of order preparation, i = annual inventory carrying cost percentage, and u = unit cost. Syn: economic lot size, minimum cost order quantity. See: total cost curve.


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