{"id":22579,"date":"2024-02-08T10:30:54","date_gmt":"2024-02-08T09:30:54","guid":{"rendered":"https:\/\/rackbeat.com\/?post_type=glossaries&p=22579"},"modified":"2025-01-20T15:26:27","modified_gmt":"2025-01-20T13:26:27","slug":"wilsons-formula","status":"publish","type":"glossaries","link":"https:\/\/rackbeat.com\/en\/glossaries\/wilsons-formula\/","title":{"rendered":"Wilson’s Formula"},"content":{"rendered":"

How Wilson’s Formula Looks<\/strong><\/h2>\n

Wilson’s Formula takes into account three main components to calculate the optimal order size: Annual consumption (D): The total amount of an item expected to be used or sold over a year. Ordering costs (S): Costs associated with placing an order, regardless of the order size. This can include administration, shipping, and handling. Storage costs (H): Costs associated with storing one unit of the item in inventory for a year, including storage space, insurance, and obsolescence.<\/p>\n

The formula is as follows:<\/strong><\/p>\n

\" EOQ = \sqrt{\frac{2DS}{H}} \"<\/p>\n

Where: EOQ – is the economic order quantity. D – is the annual demand. S – is the ordering costs per order. H – is the storage costs per unit per year.<\/p>\n

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Example of Using Wilson\u2019s Formula<\/strong><\/h2>\n

Assume:<\/p>\n