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Industrial Engineering & Manufacturing vocabulary · Inventory and Materials

Economic order quantity

Meaning in industrial engineering & manufacturing, with examples

nounAdvanced term

In industrial engineering & manufacturing, economic order quantity means: The order size that gives the lowest total cost by balancing the cost of placing orders against the cost of holding stock. Shortened to EOQ.

In Turkish: ekonomik sipariş miktarı, ESM

How it is used

A classic model first published by Ford W. Harris in 1913: EOQ = √(2DS/H), where D is annual demand, S the cost per order and H the yearly holding cost per unit. In practice it is a starting point, adjusted for minimum order quantities and price discounts.

Example sentences

  1. The economic order quantity for this resin is about 2,000 kg, but the supplier's minimum is 5,000 kg.

  2. If holding costs go up, the economic order quantity goes down.

Common collocations

  • calculate the economic order quantity
  • EOQ model
  • EOQ formula
  • holding cost
  • ordering cost
  • reorder pointThe stock level at which a new order must be placed so that the material arrives before you run out. Often shortened to ROP.
  • safety stockExtra stock kept on top of normal needs to protect against unexpected demand or supplier delays.
  • inventoryAll the materials and products a company holds: raw materials, parts, work in progress and finished goods waiting to be sold.
  • ABC analysisSorting stock items into three groups by value: A items are few but make up most of the value, C items are many but low in value, and B items are in between.

More terms: Inventory and Materials

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