What is the term for the order quantity that minimizes total holding and ordering costs?

The term that refers to the order quantity which minimizes the total holding and ordering costs is known as Economic Ordering Quantity (EOQ). The concept of EOQ is foundational in inventory management and supply chain operations. It provides a formula that helps businesses determine the optimal number of units to order so that they can efficiently manage inventory costs.

By calculating EOQ, organizations aim to strike a balance between two types of costs: the holding costs, which are incurred for storing inventory, and the ordering costs, associated with placing orders and receiving goods. When this quantity is determined, it leads to minimized overall costs, thereby enhancing operational efficiency.

In contrast, Just-in-Time (JIT) focuses on reducing inventory levels by receiving goods only as they are needed in the production process, which is not directly about minimizing total costs but rather about improving flow and reducing waste. Batch ordering refers to the practice of ordering large quantities of items at one time, which may not always minimize costs compared to EOQ. Minimum order quantity typically relates to the smallest amount that can be ordered, which does not consider cost efficiency in the same way that EOQ does.