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Economic Order Quantity (EOQ) Calculator — Optimal Order Size

Calculate the optimal order quantity that minimises total inventory cost. Balance ordering costs against holding costs to find the sweet spot for every SKU.

Quick answer: EOQ finds the order size where total cost (ordering + holding) is lowest. Ordering too often wastes on order costs; too infrequently wastes on holding costs. EOQ is the mathematical minimum.

📦 Economic Order Quantity (EOQ) Calculator

Processing, receiving, inspection, admin per PO
Typical: 20–30%. Includes storage, capital, obsolescence.
Optimal Order Quantity
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Orders Per Year
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Re-order Point
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How to Use This Calculator

  1. Enter annual demand — units sold or consumed per year for this SKU.
  2. Enter cost per order — all-in cost to place and receive one PO — admin time, freight, receiving, inspection.
  3. Enter unit cost and holding rate — 25% is a good default; increase for high-value, perishable, or fast-obsoleting items.
  4. Add lead time and safety stock — to calculate when to trigger the next purchase order (reorder point).

Worked Example

12,000 units/year, $85 order cost, $25 unit cost, 25% holding rate, 14-day lead time, 200 safety stock.

  1. Holding cost: $25 × 25% = $6.25/unit/year
  2. EOQ: √(2 × 12,000 × 85 ÷ 6.25) = 641 units
  3. Order interval: 365 ÷ 18.7 = every 19 days
  4. ROP: (12,000 ÷ 365) × 14 + 200 = 660 units

At EOQ, minimum total cost is achieved. Ordering 300 units would cost $3,400/year more; ordering 1,200 would cost $2,200/year more. Run EOQ for your top 50 SKUs — typical savings are 10–20% on total inventory cost.

Frequently Asked Questions

EOQ is the order size that minimises the combined cost of ordering (which decreases per unit as order size grows) and holding (which increases as order size grows). Every SKU has a different EOQ. Running EOQ analysis annually identifies over- and under-ordered items and can cut total inventory cost 10–20%.

EOQ assumes constant demand and fixed ordering costs. In practice, demand is variable, suppliers offer volume discounts at thresholds, and lead times vary. Use EOQ as a starting point and adjust for supplier MOQs, bulk discount breakpoints, and demand seasonality.