There are a number of key criteria which make EOQ an effective inventory management calculation: Whilst EOQ is often overlooked as too simplistic, it can still be used effectively across a range of industries and sectors.īefore jumping into implementing EOQ the first step is to assess the suitability of this measurement in relation to your specific business model. The EOC is just one of many formulae that can be used for inventory management and can be used alongside other systems for optimum inventory control. For investors, it can be a useful tool for assessing how efficiently that company is managing its inventory.Īs already mentioned, the EOQ formula determines a company's inventory reorder point. Care should be taken in ensuring that the business conditions are favourable for the formula to be used effectively.Ĭlearly, inventory control is an important factor in operating a successful e-commerce business and without such management companies can lean toward holding too much inventory during periods of slow periods and too little inventory during peak periods.Įither problem creates missed opportunities for companies: too much inventory generally means cash flow issues, while not holding enough inventory will lead to extended delivery times and lost customers.
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