📌 In the purchasing and warehousing department, we often hear popular reasons for ordering raw materials or manufacturing goods in large quantities: "Ordering in bulk gets you a discount per unit," or "Ordering extra makes the shipping costs worthwhile."
But the question management needs to ask in return is: "Is the discount worth the holding costs and the money tied up?"
This is why global supply chain management principles must apply the Economic Order Quantity (EOQ) concept to find the "balance point," which originated from Ford W. Harris's model. The principle of EOQ is to find a balance between two opposing cost structures:
- Ordering/Setup Cost: The more frequently you order, the higher this cost becomes. Examples include costs for issuing purchase orders, transportation, and machine setup
- Carrying/Holding Cost: The larger the batch ordered and held, the higher this cost escalates, including warehouse rental fees, insurance, damage/deterioration costs, and the opportunity cost of working capital
Many organizations cannot accurately calculate EOQ (Exponential Quantity) because "demand figures and actual on-site costs are inaccurate and too late." The purchasing department doesn't see the actual sales cycle, the warehouse department doesn't know how much old inventory has accumulated, and the finance department doesn't see timely cash flow
Unlock cost balance and manage inventory with precision using DBIz from R&D BI.
This dashboard provides retail and industrial businesses with comprehensive supply chain visibility for accurate and timely decision-making. ✅
- Comprehensive warehouse status monitoring: Instantly check for stock shortages, surpluses, and old inventory, preventing unnecessary stock buildup and hidden holding costs
- Analyze sales trends and cycles over the past 10 years: The system automatically compares historical data by year, quarter, and month, helping to accurately assess product demand based on actual seasonal trends, eliminating guesswork
- Manage cash flow and accounts receivable in real-time: Track cash flow and account receivable status to allocate working capital in line with purchasing cycles
- Measure production efficiency and unit costs: Displays Production Efficiency along with financial and accounting ratios on a single screen, revealing true setup costs and inventory costs
- Connect to 100+ legacy data sources: Pull data directly from SAP, Oracle, SQL Server, and other databases. No more wasting time on slow, traditional report generation
- Secure with international standards: Powered by Microsoft Security, with close support from a team of experts and business consultants
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