Demand
Use annual demand for the item or SKU being reviewed. Use units, not revenue.
Economic Order Quantity
Estimate the order quantity that balances ordering costs and holding costs, then review order frequency, reorder point, and cost trade-offs.
Browser-based calculation
EOQ cost curve
CSV export support
1. Demand and Cost Inputs
Enter annual demand, ordering cost, holding cost, working days, lead time, and optional comparison values.
Data is processed locally in the browser and is not uploaded to a server.
Ordering Cost
Include admin, purchasing, receiving, setup, inspection, and processing cost per order.
Holding Cost
Include storage, insurance, obsolescence, shrinkage, handling, and capital cost per unit per year.
About Economic Order Quantity
Economic Order Quantity estimates the order size that minimizes the combined annual cost of ordering inventory and holding inventory. It is useful when demand is reasonably stable and replenishment decisions are repeated through the year.
EOQ does not decide whether an item should be stocked. It helps decide how much to order once the item, demand estimate, ordering cost, and holding cost assumptions are understood.
How to Use This Tool
- Enter annual demand for one item or SKU.
- Enter the cost of placing or processing one order.
- Enter annual holding cost per unit.
- Add working days and lead time if you want a reorder point estimate.
- Optionally enter your current order quantity to compare it with EOQ.
Methodology, Assumptions, and Limitations
Formula Logic
Notation
D = annual demand, S = ordering cost, H = holding cost per unit per year, Q = order quantity
Economic order quantity
QEOQ = sqrt((2 × D × S) / H)
Annual ordering cost
(D / Q) × S
Annual holding cost
(Q / 2) × H
Reorder point
(D / working days) × lead time
Required Inputs
EOQ requires annual demand, ordering cost per order, and holding cost per unit per year. Unit cost, lead time, and current order quantity add context but are not required for the core EOQ formula.
Assumptions
The classic EOQ model assumes stable demand, constant ordering cost, constant holding cost, instant replenishment, and no stockouts or quantity discounts.
Limitations
EOQ may need adjustment when demand is seasonal, suppliers require minimum order quantities, capacity is constrained, lead time is variable, or price breaks change the total cost decision.
Practical EOQ Guidance
Use EOQ as a Starting Point
Round EOQ to practical pack sizes, pallet quantities, supplier minimums, and storage constraints.
Review Cost Assumptions
Ordering and holding costs are often estimated. If the result looks unrealistic, review these inputs before changing policy.
Combine With Reorder Point
EOQ answers how much to order. Reorder point answers when to order. Both are needed for practical replenishment control.
Separate Stable and Unstable Items
EOQ works best for predictable demand. Highly intermittent or volatile items may need safety stock and service-level analysis.
FAQ
What does EOQ tell me?
EOQ estimates the order quantity that minimizes annual ordering and holding costs for a single item under classic EOQ assumptions.
Should I always order exactly the EOQ?
No. EOQ is a decision guide. Practical order quantities may need to reflect pack size, supplier minimums, budget limits, storage space, and operational constraints.
Is holding cost the same as unit cost?
No. Unit cost is the purchase price. Holding cost is the annual cost of carrying one unit in inventory.
Does EOQ include safety stock?
The classic EOQ formula does not include safety stock. Use safety stock separately when demand or lead time is uncertain.