Optimal order quantity
Calculates the classic EOQ that minimizes annual ordering and cycle-stock holding costs.
Inventory cost optimization
Economic Order Quantity Calculator
Find the order quantity that balances purchasing frequency with inventory holding costs and minimizes total annual inventory-management expense.
- Optimal order quantity
- Ordering and holding costs
- Cycle time and sensitivity analysis
EOQ inputs
Enter annual demand, order cost, and the cost of carrying one unit for a year.
Demand and ordering
units/year
$
days
days
Annual holding cost
$
$
%
Practical order constraints
units
units
units
$
Inventory optimization
Balance ordering frequency and inventory carrying cost
Ordering very small quantities reduces average inventory but creates more purchase orders. Ordering very large quantities lowers order frequency but increases storage, capital, insurance, damage, and obsolescence costs. EOQ identifies the quantity where those competing annual costs are minimized.
Ordering cost
Estimates annual purchase-order expense from order frequency and the administrative cost per order.
Holding cost
Measures the annual carrying cost of cycle inventory and any additional safety-stock buffer.
Order cycle
Converts annual demand into expected purchase orders per year and days between replenishments.
Practical order size
Adjusts the theoretical EOQ for minimum order quantities and case-pack or pallet multiples.
Sensitivity comparison
Compares nearby order quantities so you can see how total annual cost changes around the EOQ.
Economic order quantity formula
EOQ increases when annual demand or ordering cost rises. It decreases when the annual holding cost per unit rises. At the theoretical EOQ, annual ordering cost and annual cycle-stock holding cost are equal.
EOQ = √(2 × D × S ÷ H)
D = annual demand, S = cost per order,
H = annual holding cost per unit
How it works
Calculate EOQ in four simple steps
1
Enter annual demand
Add the number of units expected to be sold or consumed during a full year.
2
Add ordering cost
Include the administrative and operational costs caused each time a purchase order is placed.
3
Set holding cost
Enter annual carrying cost directly or calculate it from unit value and the inventory carrying-rate percentage.
4
Review the order plan
See EOQ, practical order size, annual order frequency, cycle time, average inventory, and total cost.
Frequently asked questions
Economic order quantity FAQs
Economic order quantity is the theoretical number of units a business should order each time to minimize the combined annual cost of placing orders and holding cycle inventory.
Multiply two by annual demand and cost per order, divide the result by annual holding cost per unit, and take the square root. The result is the economic order quantity in units.
Include costs that occur because an order is placed, such as purchasing administration, supplier communication, freight setup, receiving, inspection, invoice processing, and order-specific labor.
Holding cost can include warehouse space, financing or opportunity cost, insurance, taxes, handling, shrinkage, damage, spoilage, and product obsolescence. It is often estimated as a percentage of unit value.
In the basic EOQ model, safety stock does not change the theoretical order quantity because it is a separate constant inventory buffer. It does increase average inventory and annual holding cost.
EOQ may need adjustment when demand is highly seasonal, suppliers offer quantity discounts, replenishment is gradual, stockouts are allowed, shelf life is short, storage capacity is limited, or supplier MOQs are materially different from EOQ.