The Economic Order Quantity (EOQ) calculation considers the cost to hold a product in inventory, known as a carrying cost. For example:
Rent on warehouse
Depreciation and obsolescence of inventory
Heating, lighting, security overhead
Money tied up in inventory investment (lost opportunity cost)
Obsolescence cost
The carrying cost ranges from 10% to 30% of the cost to replace an item per year.
The actual carrying cost varies per item. Products that are more subject to damage or that require special storage considerations would have higher carrying costs. Lower interest rates also lower carrying costs.
Set the EOQ carrying cost using the EOQ % field in the Forecast Parameters Maintenance window.
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