A review of Economic Order Quantity modelling, their extensions and applicability

Abstract

Abstract Inventory control and management is an important task for every organization, wherein they need to determine the order quantity and order period to maintain enough inventory to meet the demand. The original Economic Order Quantity (EOQ) model was developed by Ford W. Harris to address this problem and determine the optimal order quantity that helps in optimizing the cost incurred by the organization. Even though this model gives a very good approximation on these parameters, there were many inherent restrictions to the model that were based on un-realistic expectations. In over a century since its original publication, many researchers have made extensions to this model to address the limitations and align it with real world scenarios. In this review paper, we intend to provide a representation of the original EOQ model, its limitations and the various extensions made to the model to address these limitations.