**Limitations**

While using the EOQ model, it should be noted that it suffers from oncoming which are mainly due to the restrictive nature of the assumptions on which it is based, the important limitations are explained below.

limitations-homework-help

The assumption of a constant consumption usage and the instantaneous of inventories are of doubtful validity. As discussed subsequently deliveries from suppliers may slower than expected for reasons beyond control. It is also possible that there may be an unusual and unexpected demand for stocks. To meet such firms have to keep addition inventories which are known as safety stocks.

Another weakness of the EOQ model is that the assumption of annual demand of inventories is open to question. There is likelihood of a discrepancy between the actual and expected demand leading to a wrong estimate of the economic order quantity.

In addition, there are some computational problems involved. For instance, give the EOQ in fractions, say, 232,5 units. A more difficult situation may occur when the number of orders to be placed may turn out to be a fraction.

[vfb id=1]

### Related Finance Assignments