what is economic order quantity

what is economic order quantity refers to the optimal inventory order size that minimizes the total costs associated with inventory management, including ordering costs and holding costs. The Economic Order Quantity (EOQ) formula is a crucial tool for e-commerce businesses, helping them strike a balance between ordering too frequently and incurring high shipping costs versus overstocking and tying up capital in unsold goods. By calculating EOQ, businesses can streamline their supply chain, reduce waste, and improve cash flow, making it easier to plan for demand fluctuations. The formula considers factors such as demand rate, ordering cost, and carrying cost, ensuring that businesses can optimize their inventory levels to meet customer demand efficiently.