The Source - Profitability Checklists of the Quarter

Economic Order Quantity (EOQ)
Economic Order Quantity (EOQ) models provide a method for establishing replenishment quantity values and a structure for analysis complex problems through comparison of the cost of placing an order with the cost of holding stock. EOQ analysis is more appropriate under the following circumstances:

Demand is relatively constant and known.
Lead times are relatively constant and known.
Lots are added to inventory at receipt.
Stockouts are not permitted (or necessary, since demand and lead times are known).
Cost structure is relatively fixed (that is, it does not vary with lot size or purchase quantities).
There are no capacity or storage constraints.
The model is applied to a single economic item.

Selection of the Best Inventory Control Level
Use this list of issues to evaluate which inventory control level is appropriate.

Minimum	Middle	Maximum
Cash is limited.	Select key items for cash	Big price discounts are available.
Space is limited.	Special factors dominate. – Seasonal considerations – Customer requirements – Arrangements with suppliers