EOQ vs MRP
EOQ and MRP aren’t alternatives. EOQ is a single-item lot-sizing rule for independent-demand items; MRP is a multi-level dependent-demand planning engine that explodes requirements from a Bill of Materials and then applies a per-item lot-sizing rule - which is often EOQ[1]. The right question is "which lot-sizing rule should MRP use for this item?" - and EOQ is one of four common answers.
Where the confusion comes from
Independent demand (finished goods sold to customers) is forecast and managed by re-order policies - EOQ, ROP, Min/Max, periodic review. Dependent demand (sub-assemblies, components, raw materials) is derived from the master production schedule through the BoM explosion: if you build 100 bikes, you need 200 wheels. MRP is the algorithm that does the explosion. EOQ is the rule that decides "within the MRP plan, what size lot do we actually order or build per cycle?"
The four lot-sizing rules MRP runs
- Lot-for-Lot (LFL): order exactly the netted requirement per period. Default for JIT / lean shops.
- Fixed Order Quantity (FOQ): buyer-set Q (case-pack, MOQ).
- EOQ (Wilson Q*): sqrt(2DS/H), recomputed periodically.
- Period Order Quantity (POQ) / Wagner-Whitin: dynamic lot-sizing across time-varying demand; reduces to EOQ under constant demand.
When EOQ is the right MRP rule
- The item has reasonably constant period-over-period demand inside the MRP horizon.
- Setup or order cost S is non-trivial; LFL would over-order.
- No supplier MOQ binding above Q* (otherwise switch to FOQ at MOQ).
- Shelf life and obsolescence loaders don’t dominate the holding cost.
How SAP, NetSuite and others name it
SAP S/4HANA: lot-sizing procedure OP (Optimum lot size, Andler). NetSuite: the EOQ field on the Item record, surfaced once Demand Planning is enabled. Oracle JD Edwards: planning code "EOQ". Microsoft Dynamics 365 Supply Chain: Reorder Quantity = EOQ when the Min/Max Inventory Replenishment item-coverage rule is set with EOQ checked. Same Wilson math, four different field names.
The decision in one sentence
Don’t choose between EOQ and MRP. Run MRP for dependent demand, and pick EOQ as the lot-size rule per item where setup cost is material and demand is steady.