I hope that you have enjoyed the article “Purchasing & Inventory Management Hook Up!” As promised in that article, here’s the EOQ formula:
This image shows the equation for figuring out EOQ, or Economic Order Quantity

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EOQ = Economic Order Quantity

ACPO = Acquisition Costs Per Order

AUU = Annual Usage in Units

UC = Unit Cost

CCP = Carrying Cost Percentage

So, if you know that it costs you $150 in overhead per order, you use 5,000 widgets a year, you pay $200 per widget, and your Finance Department tells you that annual carrying costs are equal to 20% of the value of the goods in stock, you should order…

Drumroll please…

194 widgets at a time.

I don’t often place a link to this blog in my purchasing articles, so if you are reading this blog for the first time, please browse the posts below – I think you’ll like them. I post educational and purchasing-related blurbs here about three times per week, so you may want to plan regular visits to this blog. Just remember to go to http://www.NextLevelPurchasing.com/blog, bookmark this page, or, if you’re a techie, add this blog to your RSS feed reader using the Site Feed link to the right.

Hope to “see” you back here soon!

UPDATE MARCH 2012: The response to this blog post has been amazing. There is so much to learn about purchasing and inventory management and many people want – or need – to learn more. Therefore, we’ve created an online course to help everyone who is interested. The online course is entitled “Profitable Inventory Management and Control” and you can learn more about it at http://nextlevelpurchasing.com/inventory-management-and-control.php.

Charles Dominick, SPSM, SPSM2, SPSM3

Charles Dominick, SPSM, SPSM2, SPSM3 is an internationally-recognized business expert, legendary procurement thought leader, award-winning entrepreneur, and provocative blogger. Charles founded the Next Level Purchasing Association in 2000, oversaw its incredible growth, and successfully led the organization to its acquisition by the Certitrek Group in 2016. He continues to blog and provide advisory services for the NLPA on a part-time basis as he incubates his upcoming business innovations. Charles is also the co-author of the wildly popular, groundbreaking book, "The Procurement Game Plan: Winning Strategies & Techniques For Supply Management Professionals."

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