The Economic Order Quantity (EOQ) is a supply chain management tool that helps businesses make smart and cost-effective decisions regarding their inventory levels. By balancing the costs of ordering new stock, storing it and the potential of running out of needed items, the EOQ model allows businesses to strike the ideal balance between inventory costs and customer service. For example, if a business orders too little stock of a certain item, they might miss out on sales opportunities; or if they order too much, they’ll incur unnecessary storage costs. With the EOQ, businesses can optimize inventory holdings while still meeting customer needs.