economic order quantities (EOQ)

Statistics may be utilized in ordering or making economic order quantities as EOQ. It is significant for a business manager to understand that it is an economic cost if one orders a large quantity of items which have to be stored for more long before they are sold. This is as the large stock holds a lot of capital, which could otherwise be utilized in buying other items for sale.

It is significant also to realize that the longer items are stored in the stores extra will be the storage costs

On the other hand if one orders a few items for sale he will acquire relatively low storage expenses however may not be capable to satisfy all the clients. These may lose their customers whether the goods are out of stock. Hence it is advisable to work out the EOQ which will be enough for the clients in a certain period before delivery.

The EOQ will ensure that also minimal costs are acquired in terms of storage