When the selecting the purchasing method to use as the lot size when replenishing a part in inventory, the factor that would recommend using the economic order quantity is need to manage cost.
In Inventory Management, an economic order quantity means the ideal order quantity a company should purchase in order to minimize its inventory costs such as holding costs, shortage costs, and order costs.
This quantity is used in inventory management which is the oversight of the ordering, storing, and use of a company's inventory. An Inventory management is also tasked with calculating the number of units a company should add to its inventory with each batch order to reduce the total costs of its inventory.
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