EOQ (Economic Order Quantity)

Economic Order Quantity (EOQ) is a classic model in inventory management used to determine the optimal order quantity per order to minimize total inventory costs, including ordering costs and holding costs. Its core assumptions include stable demand, fixed ordering costs, holding costs proportional to inventory levels, and no stockouts allowed. In foreign trade scenarios, EOQ helps importers/exporters balance the high ordering costs of frequent orders (such as communication, transportation, customs procedures) against the high holding costs of large stockpiles (such as warehousing, insurance, capital tie-up, and depreciation risk). Note: EOQ is a theoretical model; practical application must consider factors such as quantity discounts, freight rates, lead time fluctuations, and exchange rate risks. Unlike Minimum Order Quantity (MOQ), which is the minimum purchasing threshold set by the supplier, EOQ is the ideal order quantity calculated by the buyer based on cost optimization; it also differs from safety stock, which is used to cope with demand or supply uncertainty. Foreign trade practitioners should combine EOQ with modern methods such as JIT (Just-In-Time) to avoid blindly applying EOQ and causing inventory buildup or stockouts.