Perform EOQ (Economic Order Quantity) analysis to determine the most efficient order quantity for inventory items. EOQ is based on past average demand, and it can minimize order costs, holding costs, and item costs for each item.
Datastream 7i calculates EOQ using the following variables:
Average demand per year—An appropriated number based on an item’s total usage over a specified date range. This variable assumes that demand is constant over the whole year with no seasonal fluctuations.
Average unit cost—An item’s average historical unit cost.
Number of purchases per year—An item’s projected number of annual orders, using the calculated EOQ quantity.
Date range—The number of days from an item’s first and last usage.
Total usage—The total quantity of the item used during the specified date range.
Calculate EOQ quantities either for all items or for specific items. By default, Datastream 7i calculates the above variables for all inventory items. Define and set filters for specific items when calculating EOQ.
Adhere to the following guidelines when selecting items for EOQ calculations:
Calculate and use EOQ quantities for items at a specific store rather than for all inventory items.
Use both ABC and EOQ analyses. First, run ABC analysis to partition items into their respective ABC classes, and then run EOQ analysis for all items with an A class.
Minimize inventory costs by determining the reorder point and reorder quantity for inventory items. Datastream 7i determines an item’s average annual use by dividing the total quantity of the item used by the span of time you used them. Update an item’s reorder quantity with the calculated reorder quantity.
Datastream 7i assumes that demand is constant. It does not account for demand fluctuations with forecasting models, and it does not account for quantity discounts.
Datastream recommends that you allow 90 or more days between the first and last transactions before you calculate EOQ for an item. Choose a longer period if you have seasonal items. If you calculate EOQ based on fewer than 90 days of information, the analysis does not fairly represent the inventory cycle for that item.
Follow these steps to perform EOQ analysis.
Open the EOQ analysis form (SBEOQA).
For store—Click to select the store for which to perform EOQ analysis.
Part—Click to select the part on which to perform EOQ analysis.
Part class—Click to select the class of the parts on which to perform EOQ analysis.
Stock class—Click to select the class of the stock ob which to perform EOQ analysis.
ABC class—Click to select the class of the stock (A, B, or C) for which to perform EOQ analysis.
Click . Datastream 7i calculates EOQ analysis and prints the report.