The Economic Order Quantity (EOQ) Model anticipates the optimal amount of inventory to be bought in order to maintain optimal levels of supply while minimizing carrying and ordering costs. It’s a simple step-by-step process that helps companies decide how much to buy and how often in order to maximize profits by minimizing overall costs associated with inventory management. Put simply, it’s an equation that encourages businesses to purchase the right amount of product at the right time to make sure they never experience a stockout or carry too much inventory. An important factor when calculating EOQ is the cost of ordering additional units: when this cost is taken into consideration the model provides accurate guidance allowing firms to optimize capital expenditure. By utilizing the EOQ model, companies can get the best balance between service levels and savings.