Work out batch size optimisation instantly with clear inputs, formula shown and shareable results.
The economic batch quantity balances setup cost against inventory holding cost: EBQ = sqrt(2 x annual demand x setup cost / annual holding cost per unit). Holding cost per unit is unit value times the carrying rate, which covers capital, storage, insurance and obsolescence.
Economic batch quantity
EBQ = sqrt(2 x D x S / H) where H = unit cost x holding rate
Total cost
Total relevant cost = (D / Q) x S + (Q / 2) x H
Setup and holding costs move in opposite directions, so a batch size 30% off the optimum typically raises total cost by under 5%. Round to convenient pack or pallet quantities without much penalty.
The optimal batch shrinks with the square root of setup cost. Halving setup cost cuts the batch by 29%, which is the mathematical case for quick changeover work.