Economic Order Quantity Calculator
The order size that costs least overall — balancing the cost of ordering often against the cost of holding stock.
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How it works
Two costs pull in opposite directions. Ordering frequently keeps stock low and holding costs down, but each order carries a fixed administrative and delivery cost. Ordering in bulk spreads that cost thinly but fills the warehouse with capital.
The economic order quantity is where the two curves cross and total cost is at its minimum. The curve is notably flat around the optimum, which is genuinely useful in practice: being 20% off the ideal quantity usually costs only 2% more in total, so rounding to a practical pallet or case size is nearly free.
EOQ = √(2 × annual demand × order cost ÷ holding cost per unit)
- Order cost — the fixed cost of placing one order — admin, delivery, inspection
- Holding cost — annual cost of keeping one unit in stock, including capital tied up
- Cycle — the time between orders at the optimal quantity
Worked example
31,000 units a year, 4,500 per order, 68 per unit per year to hold
Inputs
Results
Ordering 2,500 instead of 2,026 raises total cost by only about 2% — so rounding up to a full pallet is essentially free.
Frequently asked questions
What goes into holding cost?
Warehousing, insurance, obsolescence, shrinkage and — usually the largest component — the cost of the capital tied up. A common approximation is 20–30% of unit cost per year.
Does EOQ still work with volume discounts?
Not directly. Compare the total cost at the EOQ against the total cost at each discount threshold, including the lower unit price. The discount often wins, and the flat cost curve means the penalty for deviating is small.
Does EOQ assume steady demand?
Yes, and that is its main limitation. For seasonal or erratic demand it is a starting point rather than an answer — pair it with a reorder point that accounts for the variability.
Is my data sent anywhere?
No. The calculation runs entirely in your browser. Nothing you type is transmitted to us or stored.
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