Optimal order quantity 

Definition

Optimal order quantity is a term used in supply chain management. The optimal order quantity refers to the amount of goods that a company should order in order to reduce its overall costs and maximize its efficiency.  

The optimum order quantity is therefore the order quantity at which the total costs of procuring and stocking a product are minimized. These total costs are made up of the ordering costs and the warehousing costs. The concept of the optimum order quantity is often used in the context of inventory management and warehousing in order to maximize the efficiency and cost-effectiveness of material procurement.

What factors influence the optimum order quantity?

The optimal order quantity is influenced by various factors, such as 

• the demand for the product 
• the delivery times of the supplier  
• the storage costs  
• the order costs  

Determining the optimal order quantity is an important element in minimizing inventory and ordering costs and making the company's supply chain more efficient. 

What is the formula for the optimum order quantity?

The optimum order quantity can be calculated using the Andler formula (also known as the Wilson formula or Economic Order Quantity, EOQ). The formula is as follows:

Root of (annual requirement x order costs x 2) / (product value x inventory cost rate) 

What is not taken into account in the optimum order quantity?

Some factors are not taken into account when calculating the optimum order quantity, including

• Fluctuations in demand: The Andler formula assumes a constant quantity of demand.
• Varying ordering and inventory costs: The formula assumes that these costs remain constant.
• Delivery times: The Andler formula does not take delivery times or fluctuations in delivery times into account.
• Discounts for larger order quantities: Volume discounts or price reductions for larger orders are not included in the calculation.

Artificial intelligence to calculate the optimum order quantity

Artificial intelligence (AI) can be used for calculation and help analyze large amounts of data for determining the optimal order quantity. In doing so, the AI accesses historical data on demand, delivery and storage, for example, and derives patterns and trends from this. 

Based on these findings, models are determined to calculate the optimal order quantity. The models take into account several factors, such as delivery time, ordering costs and storage costs. 

Using Artificial Intelligence to calculate the optimal order quantity leads companies to achieve better business results and improve their forecasting and decision-making. By predicting demand more accurately, excess inventory and shortages are avoided while reducing inventory and ordering costs. 

What is the goal of the optimal order quantity?

The aim of the optimal order quantity is to minimize the overall costs of procurement and warehousing. By determining the optimum order quantity, a company can balance the costs of ordering and storing materials or products and thus improve the cost-effectiveness and efficiency of inventory management. This helps to avoid both excess stock and material shortages.

What is the advantage of the optimum order quantity method?

The optimum order quantity method offers several advantages:

• Cost minimization: By determining the optimal order quantity, companies can minimize their total costs for orders and warehousing.
• Efficient inventory management: It enables better planning and control of inventories, thus avoiding overstocks and material bottlenecks.
• Basis for decision-making: The calculation of the optimum order quantity provides a sound basis for decision-making for inventory planning and procurement.

By applying the optimal order quantity, companies can reduce their inventory costs, increase the efficiency of their procurement processes and thus improve their overall supply chain performance.

Importance of the optimal order quantity for the food industry 

The optimal order quantity is of great importance for the food sector, as many perishable food products have to be ordered every day. The optimal order quantity ensures that no unnecessary costs are incurred, because overproduced goods must be disposed of and ordered fresh for the next day. Too low an order quantity can lead to shortages and lost sales. Too high an order quantity leads to unnecessary warehousing costs and food waste.