# What are the limitations of economic order quantity?

**Limitations of EOQ**Model: The assumption of constant usage and the instantaneous or immediate replenishment of inventories are not always practical. Safety stock is always required because deliveries from suppliers may be delayed for reasons beyond control. Also because there may be an unexpected demand for stocks.

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Herein, what are the advantages of economic order quantity?

**Advantage**: Minimizes Storage and Holding Costs The main **advantage** of the **EOQ** model is the customized recommendations provided regarding the most economical number of units per **order**. The model may suggest buying a larger **quantity** in fewer **orders** to take **advantage** of discount bulk buying and minimizing **order** costs.

One may also ask, what is EOQ and its formula? Definition of **EOQ** **The formula** to calculate **the economic order quantity** (**EOQ**) is **the** square root of [(2 times **the** annual demand in units times **the** incremental cost to process an order) divided by (**the** incremental annual cost to carry one unit in inventory)].

Subsequently, one may also ask, what is economic ordering quantity?

The **Economic Order Quantity** (EOQ) is the number of units that a company should add to inventory with each **order** to minimize the total costs of inventory—such as holding costs, **order** costs, and shortage costs.

How is economic order quantity calculated?

**EOQ formula**

- Determine the demand in units.
- Determine the order cost (incremental cost to process and order)
- Determine the holding cost (incremental cost to hold one unit in inventory)
- Multiply the demand by 2, then multiply the result by the order cost.
- Divide the result by the holding cost.