Wilson formula

Around the formula...

The Wilson formula determines the optimal quantity to order. It consists in playing off the cost of placing the order (administrative cost, discount in line with size of order) against the cost of storage (financial cost of tying up capital, storage and risk).
It assumes that the daily consumption of the good to order (k) is stable and that it is possible to estimate a storage cost (S in € per unit per day) and the cost of placing an order (P in € per order).
The optimum quantity, Q, is: