A Post Modern Look at the EOQ Model: Deconstruction of the Total Cost Function Leads to JIT

Abstract

When the hold cost H is much larger than anticipated by the usual textbook treatment of the EOQ formula, order of magnitude larger, the EOQ total cost function is pointed rather than flat. This pointedness logically causes the EOQ model to yield JIT-like results. The flatness or pointedness of the EOQ total cost curve depends on holding cost alone and not annual demand or batch cost. This paper uses the mathematics of conic sections to develop measures of the pointedness of the EOQ total cost function.