EOQ Math Docs

Github Links:

https://github.com/Aues12/IE-Models-Catalog/blob/main/inventory_models.py

1. Basic EOQ

Basic_EOQ class of inventory_models.py.

• Definition: Economic Order Quantity (EOQ) is the simplest inventory model.

• Assumption: Instant delivery, constant demand.

• Formula:

  $Q^* = \sqrt{\frac{2DS}{H}}$

  Where:

  • D: Demand rate
  • S: Ordering cost
  • H: Holding cost per unit

This model is the foundation. All variations build upon it.

2. EOQ Variations

2.1 EPQ (Economic Production Quantity)

EPQ class of inventory_models.py.

• Definition: An extension of EOQ used when items are produced gradually rather than delivered instantly.

• Assumptions:

  • Production occurs at a finite rate (P).
  • Demand (d) is consumed simultaneously while producing.
  • No shortages allowed.

• Formula:

  $Q^* = \sqrt{\frac{2DS}{H} \cdot \frac{P}{P - d}}$

  Where:

  • P: Production rate
  • D: Demand rate

• Key Difference: Inventory builds up gradually during production and is consumed at the same time.