Who Should Use EOQ? Identifying the Right People and Roles

Economic Order Quantity (EOQ) is a practical tool, but it is most effective when used by the right people in an organization. This article explains who benefits from EOQ, what roles use it day-to-day, and how different stakeholders should apply the concept in their workflows. The tone is friendly and aimed at beginners who want to know whether EOQ is relevant to their job or business.

Primary users of EOQ

• Inventory managers and warehouse supervisors: These professionals oversee stock levels, storage costs, and replenishment cycles. EOQ gives them a baseline order quantity to balance carrying and ordering costs and helps plan warehouse space and labor needs.
• Procurement and purchasing teams: Purchasers negotiate suppliers, place orders, and set reorder policies. EOQ helps define order lot sizes that minimize total inventory costs while keeping suppliers’ terms and discounts in mind.
• Small business owners: Owners who handle purchasing and inventory without specialized software can use EOQ as a simple, spreadsheet-friendly method to reduce unnecessary stock and ordering expenses.
• Operations and production planners: In manufacturing environments where raw materials are used at steady rates, EOQ supports materials planning and can be integrated with MRP logic when appropriate.
• Supply chain analysts and consultants: Analysts use EOQ when modeling cost trade-offs, benchmarking a client’s ordering practices, or recommending quick improvements for inventory-heavy operations.

Secondary users and supporters

• Finance teams: CFOs and cost accountants appreciate EOQ because it clarifies the carrying costs tied up in inventory and supports cost-to-serve analysis and budget planning.
• IT and systems teams: Those who implement WMS, ERP, and inventory systems use EOQ calculations to configure reorder suggestions and automated order triggers.
• Sales and demand planners: While sales teams are not EOQ owners, they supply the demand inputs (D). Accurate demand forecasts are essential for EOQ to be useful.

Who should not rely on EOQ alone?

• Demand planners for highly variable items: If demand is sporadic, seasonal, or unpredictable, EOQ’s constant-demand assumption makes it a weak fit.
• Managers of perishable goods: Products with short shelf lives, like fresh food or certain chemicals, often need different models emphasizing expiration and safety stock instead of EOQ.
• Businesses with complex multi-item constraints: If maximum warehouse capacity, truckload constraints, or supplier minimums create interactions between SKUs, single-item EOQ misses critical system-wide effects.

How each role should apply EOQ

• Inventory managers: Use EOQ to set standard order quantities for stable SKUs; combine with periodic reviews and space planning. Recalculate EOQs annually or when holding/ordering costs change significantly.
• Procurement: Integrate EOQ into negotiations. If supplier minimums or price breaks exist, compare EOQ-based costs with supplier-constrained options to choose the best overall cost.
• Small business owners: Start by computing EOQ for your top-cost or top-volume items using simple spreadsheet cells for D, S, and H. Adjust as you observe real-world lead times and supplier behavior.
• Finance: Work with inventory teams to estimate holding cost H realistically (including capital cost and insurance). Use EOQ results to estimate cash tied up in inventory and inform working capital needs.

Training and skills

Basic familiarity with algebra and spreadsheets is enough to use EOQ. More advanced usage benefits from understanding demand forecasting, unit cost structures, and how ERP/WMS systems automate reorder logic.

Common mistakes by users

• Using inaccurate demand numbers (D), which makes EOQ recommendations misleading.
• Underestimating holding costs (H) by neglecting capital costs or obsolescence.
• Applying EOQ rigidly to items with seasonal spikes or intermittent demand.

Collaborative approach

EOQ is most powerful when used as part of a cross-functional process. Procurement, inventory, finance, and IT should align on the input values and review frequency so EOQ-derived order quantities support broader business goals.

Bottom line

EOQ is a versatile, beginner-friendly tool best used by inventory managers, procurement professionals, small business owners, and supply chain analysts for items with stable demand. The model’s simplicity is its strength — but real improvements come when the right people use EOQ thoughtfully and in coordination with forecasting, supplier negotiation, and systems automation.