High Eccentricity EOQ Total Cost Function Yields JIT Results
Washburn University. School of Business
Kaw Valley Bank
For perishable inventory, the hold cost H is much larger than anticipated by the classical EOQ formula, orders of magnitude larger. For perishable inventory, the EOQ total cost function is pointed rather than flat. This pointed-ness logically causes the EOQ model to yield JIT-like results. The pointed-ness (eccentricity) of the EOQ total cost curve depends solely on holding cost H and not annual demand D or batch cost S. D and S determine the level of the TC curve but not the shape.