Use of Economic Order Quantity Technique for Inventory Management: A Review

Inventory management is a crucial aspect of managing a company successfully. Inventory is vital part of current assets mainly in manufacturing concerns. Huge funds are committed to inventories as to insure smooth flow of production to meet customer demand. Maintaining inventories also involve holding and carrying cost along with opportunity cost. An efficient inventory management ensures continuous production by maintaining inventory at a satisfactory level. It also minimizes capital investment and cost of inventory by avoiding stock-pile of product. Efficient and effective inventory management goes a long way in successful running and survival of business firm. Many industries whether manufacturing or purchasing, facing great challenges in managing inventories. Poor inventory management may results under-stocking, over-stocking as well as high inventories total cost. In this paper inventory management technique Economic Order Quantity (EOQ) and its benefits to different industries is discussed. The paper also present a literature review to show applications of this technique and improvement in ordering cost, cost of inventory, lead time, reorder point. This paper concludes with specifying the important contribution of economic order quantity technique in attaining the success.