ABSTRACT
In reality, demand and supply may not be at equilibrium initially. If demand for a product is greater than the available supply, customers might purchase the product from another firm, a switch that leads to a loss of revenue for the first firm that it could have received had it stored units of that product. Similarly, if the demand for the product is less than supply, the firm can store an optimum quantity with minimum cost of inventory, a quantity that can be used in due time to satisfy customers’ demand. The Economic Order Quantity Model is assumed that demand for inventory is known with certainty; the ordering firm receives its order when an order for that product is placed-that is, inventory renewal is instantaneous; carrying and ordering costs per unit are fixed; and inventory is renewed only when inventory level reaches zero.
