Certified Maintenance & Reliability Professional (CMRP) Practice Exam 2026 – All-in-One Guide to Master Your Certification!

The purpose of Economic Order Quantity (EOQ) in inventory management is to calculate the optimum order quantity that minimizes the total cost associated with inventory. This includes considerations of ordering costs and holding costs. By identifying the optimal quantity to order, businesses can reduce the costs of having too much inventory (which incurs holding costs) while also minimizing the costs related to placing frequent orders (which incurs ordering costs).

This balance is crucial for maintaining efficient operations and ensuring that capital is utilized effectively. By applying the EOQ formula, organizations can streamline their inventory management processes, reduce waste, and enhance overall profitability through more informed purchasing decisions.

The focus of EOQ is not on increasing inventory costs or merely improving the inventory turn ratio without regard for costs; rather, its primary goal is to find the most cost-effective amount to order, thereby supporting better financial health and operational efficiency.