Define and describe the EOQ approach to inventory management
What will be an ideal response?
Answer: EOQ (economic order quantity) is the traditional inventory control method to maintain sufficient inventory levels so production can continue without interruption. EOQ should take into account a situation where inventory use is greater than expected. EOQ calculates the optimal order size to minimize the sum of ordering, carrying, and stockout costs. Ordering costs — all expenses associated with processing purchasing transactions. Carrying costs — costs associated with holding inventory. Stockout costs — costs from inventory shortages, such as lost sales or production costs.
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