Free tool
Economic order quantity calculator
Economic order quantity is the order size where ordering costs and holding costs balance, giving the lowest total cost per year. Take the square root of two times annual demand times cost per order, divided by holding cost per unit per year. For 3,600 units, $75 an order and $3 holding, that is 425 units.
EOQ calculator
How to use it
- Estimate annual demand. Total the units you expect to sell in a year. Scaling a recent window works: 300 units a month is 3,600 a year. Adjust it if you know next year will differ from last.
- Work out your cost per order. Add up what it costs to place and receive one order regardless of its size: admin time, freight, inspection, any per-shipment fee. This is the cost that ordering more often multiplies.
- Work out your holding cost per unit per year. Add storage, insurance, shrinkage and the cost of the cash tied up in one unit for a year. Many merchants approximate it as 20% to 30% of unit cost. It must be above zero for the formula to resolve.
- Read the order quantity and sanity check it. The calculator returns the square root of two times demand times order cost, divided by holding cost, rounded up. Compare it against your supplier's minimum order quantity and case size before you use it.
Every term used here is defined in the inventory planning glossary, and the arithmetic behind all of it is worked through on how inventory forecasting works.
Questions merchants ask
What is the EOQ formula?
EOQ equals the square root of (2 x D x S) divided by H, where D is annual demand in units, S is the cost of placing one order, and H is the cost of holding one unit for a year. With D = 3,600, S = $75 and H = $3, the EOQ is 425 units.
What does EOQ assume?
Steady demand, a constant unit cost, a constant lead time, and no quantity discounts. Real stores break at least one of those most of the time, which is why EOQ is best read as a starting point for a conversation with your supplier rather than an instruction.
How do I handle a supplier minimum or case size?
Round up. If EOQ says 425 and your supplier ships in cases of 12, order 432. If their minimum order is 500, order 500 and accept that you are carrying more inventory than the model would choose. The formula tells you the shape of the trade, not the final number.
Does EOQ tell me when to order?
No. EOQ answers how much, and the reorder point answers when. They pair up: the reorder point tells you the stock level that triggers an order, and EOQ suggests how big that order should be. Both are on this site as separate calculators.
Order quantities from your real costs
Replinish keeps supplier costs, lead times, minimums and case sizes per supplier, and applies them when it suggests how much to order.
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