EOQ Revision & Application.

Excellent enterprise can't do without excellent Inventory Management, which has long been regarded as an important study field in Management of Enterprise. How to restrict the gross cost to a maximum low level while maintaining good service quality is a crucial criteria for judging how the stock management runs. Ever since EOQ came into being in the early 19th, inventory management has experienced a century of development and evolvement, which develops new management patterns such as MRP and VMI. At the same time, EOQ is also gradually adapted to management practice by expanding its study to deteriorating, partial backlogging, time-varying demand, and time-value cost. The flexibility and easy operation makes EOQ ever-green in inventory management.In recent years, China undergoes a speedy development in economy. Sever discussions are carried out on the prediction of future inflation trend in China. In retrospect of the CPI from 2001-2006, all went up by great margin, among which the CPI of energy resource, raw material and power rose even up by 30.7%. According to the data issued by National Statistics Bureau, national CPI in Aug., 2007 is up by 6.5%. In addition, the Central Bank has announced a 0.27% rise on interest rate, which makes the 1-year loan interest rate ascend from 6.12% to 6.39%. In consideration of the latest data of 2007 and the history in and before 2006, it is believed that time-valve cost shouldn't be ignored in stock management in the coming few years. The paper states the importance of time-value cost in inventory management, and makes some revision on the traditional EOQ mode by taking VAT into consideration. What's more, the paper has applied the revised EOQ in case study, and given useful improvement suggestion for the case enterprise. In one hand, the entity should try to avoid waste under the instruction of EOQ in the current management system. On the other, a revolution should be taken up at a deeper level in consideration of the problems revealed by the study of storage fee (C₂), which guides the nextperiod of management. As the process repeats, inventory storage level will be lower and lower, and finally reaches the ideal stage of Inventory Management.