# Economic order quantity

### From Glossary

Abbreviated EOQ. This is the level of inventory to order that minimizes the sum of holding and ordering costs. The inventory function, , is the following periodic sawtooth function, where is the time between orders, and is the ordering quantity:

where is the rate of demand (inventory units per time units), and for . The inventory becomes zero at , which requires a new order of units. The model is thus:

where is the holding cost (currency per time units), so is the average holding cost, and is the fixed cost of ordering, so is the average ordering cost. The solution is , which yields the Economic Order Quantity (EOQ): . See the more general production scheduling problem.