Difference between EOQ

tool with traditional

method
EOQ METHOD
TRADITIONAL METHOD
- The optimal quantity of orders
that minimizes total variable
costs required to order and hold
inventory.
- The EOQ tool can be used to
model the amount of inventory
that we should order each
month.
- Have two categories of
inventory costs are ordering
costs and carrying costs.

- costs related to storing and

maintaining its inventory over
a certain period of time.
Typically, inventory costs are
described as a percentage of
the inventory value.
- It is commonly accepted that
the carrying costs alone
represent generally 25% of
inventory value on hand.
- Have three categories is
ordering cost, carrying costs,
and stock-out costs.