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The basic calculation considers the demand during the period to be covered (T x D), plus the demand during the lead time (LT x D), subtracting the quantities in stock (S) and the quantities in the pipeline (P):Image Removed


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<center><table>
<tr><td><font size="10">
<i>Q</i> =
</td>
<td>
<td>
<center><font size="10">
<i>T.D</i> + L</font><font size="6">T</font><font size="10">.<i>D - S - P</i>
</font></center>
</td></tr>
</table>
</center>


If preparing an order to be launched when inventory reaches the pre-established re-order level, the quantity to be ordered (Q) will be calculated in the same way but using the re-order level instead of the running stock level.

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HTML
<center><table>
<tr><td><font size="10">
<i>Q</i> =
</td>
<td>
<td>
<center><font size="10">
<i>T.D</i> + L</font><font size="6">T</font><font size="10">.<i>D - Ro - P</i>
</font></center>
</td></tr>
</table>
</center>


In cases where the safety stock (SS) must be replenished (totally or partially) the required amount will have to be added to the previous formula.Image Removed


HTML
<center><table>
<tr><td><font size="10">
<i>Q</i> =
</td>
<td>
<td>
<center><font size="10">
<i>S</font><font size="6">S</font><font size="10"> + T.D </i> + L</font><font size="6">T</font><font size="10">.<i>D - S - P</i>
</font></center>
</td></tr>
</table>
</center>


More sophisticated models can be applied to calculate the optimal quantity of goods to order. The Economic Order Quantity (EOQ) model can be used for computing the economic optimal quantity of goods to order. This model is based in economic variables such as the ordering costs and the holding costs, and it conceives the optimal quantity as a balance between increased costs due to holding a lot of stock, versus the economy of scale obtained when making big orders.

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