Operations Management: Sustainability and Supply Chain Management, Twelfth Edition

Inventory Models for Independent Demand

In this section, we introduce three inventory models that address two important questions: when to order and how much to order. These independent demand models are:

1. Basic economic order quantity (EOQ) model

2. Production order quantity model

3. Quantity discount model

The Basic Economic Order Quantity (EOQ) Model

The economic order quantity (EOQ) model is one of the most commonly used inventory-control techniques. This technique is relatively easy to use but is based on several assumptions:

Economic order quantity (EOQ) model

An inventory-control technique that minimizes the total of ordering and holding costs.

1. Demand for an item is known, reasonably constant, and independent of decisions for other items. ...