How EOQ Is Calculated in Oracle Replenishment Planning
The economic order quantity (EOQ) is the optimal quantity that should be ordered so that inventory holding and ordering costs are minimized.
In a replenishment plan, you can use the reorder point (ROP) and EOQ policy type to calculate replenishments on the basis of the EOQ.
Settings That Affect EOQ
The following settings affect the EOQ calculation:
-
Whether information is present for an item-location combination in the Items table
-
Whether segment-level defaults have been defined in the policy assignment set for the replenishment plan
How EOQ Is Calculated
The following formula provides the EOQ:
Equation Variable |
Description |
---|---|
C |
Fixed cost per order defined at the item-location level The value of C is read as follows:
|
H |
Annual carrying cost per item-location combination, which is provided by this calculation: Carrying Cost Percentage * Standard Cost The value of H is read as follows:
|
D |
Annual demand for the item-location combination, which is provided by this calculation: Average Daily Demand * Total Number of Working Days in a Year |