Inventory Management and EOQ Quiz

Lot-for-lot (L4L) involves ordering exactly what is needed, changing as requirements change, and requiring time-phased information. It is most often used with 'A' items and results in no unused inventory.

The fixed order quantity involves ordering the same amount each time, being easy to understand, but not minimizing costs. It can be implemented through a min-max system where orders are placed when inventory goes below the minimum and up to the maximum.

The periods of supply rule involves ordering enough to cover a demand over a certain period of time, such as ordering based on days of supply or using the period order quantity. This concept is discussed further in the text.

The purpose of EOQ is to minimize the total costs of carrying and ordering inventory. It operates under assumptions that demand is relatively constant and known, the item is purchased in lots or batches, preparation costs and ordering costs are constant and known, and replacement occurs all at once.

EOQ may not be suitable for make-to-order scenarios where the customer sets the quantity needed, when shelf life is short, or when there are limitations related to tool life and raw material batch size.