The key points in Chapter 12 (Chapter 13) tell us that good inventory management is important for successful organizations. The key issues are when to order and how much to order. Because all items are not of equal importance, it is necessary to establish a classification system for allocating resources for inventory control. EOQ models answer the question of how much to order. Variations of the basic EOQ model include the quantity discount model and the economic run size model. EOQ models tend to be rather robust: even though one or more of the parameters may be only roughly correct, the model can yield a total cost that is close to the actual minimum. ROP models are used to answer the question of when to order.

What are the primary pruposes of holding inventory?

What are the requirements for effective inventory management?

What are the major assumptions of the EOQ model?