Economic Production Quantity

Economic Production Quantity is designed to help inventory managers and practitioners better understand the benefits of maintaining the right amount of inventory. This method is an extension of the economic order quantity model, also known as the EOQ model. It is used to determine the optimal order quantity that an organisation should place with a supplier to minimise inventory costs, while balancing inventory holding and average fixed order costs. It assumes the order quantity arrives complete and immediately after ordering, meaning that the parts are produced by another company and are ready to be shipped when the order is placed.