To do this successfully, organize your storage room or stock so that it’s effortless to implement FIFO. For instance, grocery stores organize their freezer products so that the oldest purchases are displayed right at the front.
Economic Order Quantity (EOQ) Method
The economic order quantity (EOQ) model is great if you’re passionate about running a lean
warehouse. You have to work out the ideal order quantity to reduce logistics expenses and optimize storage space.
It isn’t difficult to figure this out – all you need are these three variables:
The total cost of the holding germany telegram screening inventory (holding costs)
Yearly demand
Order cost
EOQ = square root of: [2(setup costs)(demand rate)] / holding costs
Let’s say you were selling a popular children’s toy to shops and that you had a setup cost of $750, with a holding cost of $100 every year. Now let’s say you had a yearly demand of 10,000 units. Your EOQ would be worked out as follows.
Square root of: (2 x 10,000 x 750) / 100 = 38.7
That means that a minimum order should be for at least 39 toys (rounding up), in order to minimize your costs.