... is the level of inventory that minimizes the total inventory holding costs and ordering costs. The framework used to determine this order quantity is also known as Wilson EOQ Model. The model was developed by F. W. Harris in 1913. But still R. H. Wilson is given credit for his early in-depth analysis of the model.
Underlying assumptions:
• The ordering cost is constant.
• The rate of demand is constant
• The lead time is fixed
• The purchase price of the item is constant i.e no discount is available
EOQ is the level of the inventory where ordering cost and carrying cost remains equal.
Something to do with the inventory costing in our system.
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