EOQ calculator (economic order quantity)
Calculate the order quantity that minimizes the sum of ordering and holding costs for an item with steady demand.
Put EOQ to work
Managing stock for several items? The reorder point and safety stock template is a ready-made starting point for inventory planning next to your EOQ.
How it is calculated
EOQ = √(2 × D × S ÷ H), where D is annual demand, S the cost per order and H the annual holding cost per unit. Orders per year = D ÷ EOQ. Cycle length = 365 ÷ orders per year.
Worked example
D = 12,000, S = 50, H = 2: EOQ = √(2 × 12,000 × 50 ÷ 2) = 774.6 units, 15.49 orders a year, cycle of 23.56 days.
Steps
- Enter the annual demand for the item.
- Enter the fixed cost of placing one order.
- Enter the holding cost per unit per year, then read the EOQ and cycle length.
Frequently asked questions
What goes into holding cost?
Capital cost (interest), storage, insurance, obsolescence and handling. A common rule is 20 % to 30 % of the unit cost per year.
Does EOQ include quantity discounts?
No. With discounts, compare total cost at each break point against the EOQ.
Does EOQ assume constant demand?
Yes. For variable demand, use safety stock and a reorder point as well.
Related calculators
References
Economic order quantity (Harris, 1913; Wilson formula). See also APICS / ASCM inventory management texts.
Estimates for information only. Verify critical values with a qualified engineer or your supplier standards.