# Class 5: EOQ Classic Model (🗞️) *July 28, 2025 | [Transcript](./🦦/5nv(🗞️)15778_intro_ops_otter_ai.md)* ## 🎯 Teaching Arc **Hook**: "Why order truckloads when you need boxes?" **Puzzle**: Financing costs vs economies of scale **Resolution**: EOQ balances holding vs ordering costs **Model**: Q* = √(2DF/H) ## 🗣️ Quality Participation **Key Insight**: Cash Conversion Cycle impacts stock price - Amazon mentioned: Negative CCC (paid before paying suppliers) ## 📊 Quick Scores Track: CCC understanding, scale economics insights ## 🔗 421 Diagram ``` 🟢 Order capacity 🟣 Inventory needs Storage space Reliable supply \ / Coordinate ←→ Compel / \ 🟠 Min total cost 🔴 Product availability Optimize CCC No stockouts ``` ## 📚 Exam Essentials **Inventory Pros**: Customer access, hedge risk, scale economics **Cons**: Financing cost, obsolescence, storage/shrinkage **Formula**: Total Cost = Holding + Ordering **Traps**: ❌"Always minimize inventory" ✅"Find optimal balance" ## 🎓 Recitation Points - "CCC directly impacts stock price" - "Deliberate scarcity can be strategic" - "Auto industry hit by chip shortage" --- *Previous: [MinuteClinic](./4🏥_Capacity_MinuteClinic.md) | Next: [Zara](./6👗_Zara_FastFashion.md)*