What occurs at the Economic Order Quantity (EOQ)?

At the Economic Order Quantity (EOQ), the total annual holding costs (TAHC) are equal to the total annual supply chain costs (TASC). The EOQ model is designed to determine the optimal order quantity that minimizes total inventory costs, which include both holding costs and ordering costs.

At this point, the costs balance out; increasing the order quantity leads to higher holding costs, while decreasing it leads to higher ordering costs. By finding the EOQ, an organization effectively minimizes those costs, ensuring that the financial burden of holding inventory does not exceed the costs incurred from placing orders. This balance is what makes the EOQ a pivotal concept in inventory management, allowing companies to operate efficiently and cost-effectively.

The other options do not accurately describe the relationship between TAHC and TASC at the EOQ, as those situations either indicate a higher cost scenario or imply optimization without the clear equality required by the EOQ model.