A COMPARISON OF THE ECONOMIC ORDER QUANTITY AND QUICK RESPONSE INVENTORY REPLENISHMENT METHODS

Abstract

When determining order quantity, logistics managers can choose between ordering the Economic Order quantity (EOQ) or a Quick Response (QR) quantity. QR is a general term that collectively describes several rapid-replenishment inventory methods such as Just-In-Time or Continuous Replenishment. The QR order quantity is defined as the minimum inventory needed to support operations until the next delivery. The EOQ and the QR methods are substantially different because the EOQ minimizes the joint cost of ordering and holding inventory whereas the QR method minimizes only the cost of holding inventory. The goals of this research are to compare the costs of the two methods and to propose rules that help managers select the more appropriate method to use in specific situations.