Prediction of economic order quantity using a modified analytical approach

Inventory carrying costs significantly impact the financial health and overall performance of industries, as they account for approximately 20% to 30% of the total expenses related to holding and maintaining raw and finished inventory. The Economic Order Quantity (EOQ) is a key metric used to control these costs. However, the traditional EOQ model assumes constant holding and carrying costs, which limits its applicability in the dynamic environment of competitive markets. In this study, a novel model has been developed to predict EOQ by incorporating the effect of inflation on ordering costs. The value of this proposed model is demonstrated by comparing its results with those from the traditional model. Additionally, a case study based on a real-world example highlights the importance of accounting for inflation in calculating total ordering costs. The findings indicate that factoring in inflation when predicting EOQ can lead to reduced ordering costs.