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Where:

u = Average monthly usage based on up to 12 previous months, computed by the application

s = Cost per order

i = Carrying cost, per dollar, of average inventory

c = Unit cost at last purchase, maintained by the application

The value in the EOQ maximum number of stockouts per year field on the EOQ tab of the Data -> Parts Items -> Setup -> Options screen is used to  calculate when and how many of each part you should order to optimize management of inventory resources.

The date and time added (listed on the Basic Info tab of the Data -> Parts Items -> Location Information screen) is used to determine the age of the part or the part location. If a part does not meet the minimum age requirement for the EOQ calculation, EOQ values are not calculated.

The maximum stockout levels have a severe impact on the reorder points and safety stock levels. A smaller maximum number of stockouts leads to a higher safety stock level, and for very small values of maximum stockout, the safety stock level rises dramatically.

For categories or parts that are critical, consider setting maximum stockout levels less than or equal to 10. For categories or parts for which a stockout is not significant, consider values in the 50–99 range.

The reorder point, reorder quantity, and safety stock values are calculated as 0 when there has been negative total usage for the part during the previous 12 months.

• Tip: Some experimentation over a period of time is required; it takes the application at least one year to accumulate the data it requires to make meaningful EOQ calculations. Appendix A of the FASuite Setup Guide provides more information about EOQ calculations.