3 terms
Economic Order Quantity
If "make to order" is used and customer wants entire order delivered in one shipment. If order size is constrained by capacity limitations.
When not to use EOQ?
If significant quantity discounts are given for ordering larger lots. If replenishment of the inventory is not instantaneous.
When to modify EOQ?
If "make-to-stock" strategy is followed and item has stable demand. If carrying costs per unit and setup or ordering costs are known and relatively stable.
When to use EOQ?