Basic economic order quantity (EOQ) model
This model is one of the oldest and most commonly used in inventory control. It is based on a number of assumptions:
- The demand for the item is known, constant and independent of the demand for other items
- The lead time (time between ordering and receipt) is known and fixed
- The receipt of the order occurs in a single instant and not over a period of time
- Quantity discounts are not calculated as part of the model
- The only costs that may vary within the model are the costs of ordering (or setting up a machine if the item is manufactured) and the storing or holding cost of the item ?
- Stock outs or shortages do not occur.