1. Demand Rate (D): The number of units required over a specific period. Accurate demand forecasting is essential for entrepreneurs to avoid overstocking or stockouts. 2. Ordering Cost (S): The cost associated with placing an order, including administrative expenses, shipping, and handling fees. Lower ordering costs can lead to more frequent orders. 3. Holding Cost (H): The cost of holding a single unit in inventory for a given period, including storage, insurance, and depreciation. High holding costs necessitate smaller order quantities.