Economic Order Quantity (EOQ)

A type of fixed order quantity which determines the amount of an item to be purchased or produced at one time. The intent is to minimize the combined costs of acquiring and carrying inventory. EOQ assumes that acquisition costs (set up, receiving, etc.) are fixed. As such, it is in direct conflict with the Just-in-Time approach, which attempts to drive acquisition costs to zero via minimizing set up time and utilizing techniques such as statistical process control, source inspection, pooled freight arrangements, etc.