Economic Order Quantity (EOQ) Calculator
Calculate the order quantity that minimises your combined ordering and holding costs.
What is Economic Order Quantity?
Economic Order Quantity (EOQ) is the order size that minimises the total cost of inventory — specifically the trade-off between ordering cost and holding cost. Order in small, frequent batches and you rack up ordering costs; order in big batches and you pay to hold the surplus. EOQ is the sweet spot between the two.
The EOQ formula
EOQ = √(2DS / H), where D is annual demand in units, S is the fixed cost to place one order, and H is the cost to hold one unit in stock for a year. The square root is what balances the two opposing cost curves at their combined minimum.
Worked example
With annual demand of 12,000 units, $75 to place an order, and $3 per unit per year to hold stock: EOQ = √(2 × 12,000 × 75 ÷ 3) = √600,000 ≈ 775 units. That means roughly 15 orders a year, and it minimises the combined ordering and holding bill.
Assumptions and limits
Classic EOQ assumes steady demand, a constant unit price, and a fixed ordering cost. Real supply chains have volume discounts, minimum order quantities, and seasonality — so treat EOQ as a strong starting point, then adjust for supplier terms and demand patterns.
Frequently asked questions
What counts as 'cost per order'?
Every fixed cost of placing one order regardless of size: purchasing admin time, inbound freight, and receiving/inspection labour. It excludes the cost of the goods themselves.
How do I estimate holding cost per unit?
Add up the cost of capital tied up, warehouse space, insurance, shrinkage, and obsolescence for one unit over a year. It is often 15–30% of the unit's value — try our Inventory Carrying Cost calculator.
Should I always order exactly the EOQ?
Use EOQ as a baseline, then round to a practical pack, pallet, or supplier minimum. Pair it with a reorder point so you know both how much to order and when.
What if demand is seasonal?
EOQ assumes steady demand. For seasonal products, calculate EOQ per season using that season's demand rate rather than a flat annual figure.
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