Find the order quantity that minimises the combined cost of ordering and holding stock.
EOQ balances two opposing costs: ordering often is expensive in order costs, ordering rarely is expensive in holding costs. The square-root form means the optimum is flat near the minimum, so being 20% away from EOQ costs only a few per cent more. Because the cost curve is flat around the optimum, EOQ is best used as a sanity check on order size rather than a figure to follow to the unit.
Economic Order Quantity
EOQ = √(2 × annual demand × order cost ÷ annual holding cost per unit)
EOQ = √(2 × annual demand × order cost ÷ annual holding cost per unit) EOQ balances two opposing costs: ordering often is expensive in order costs, ordering rarely is expensive in holding costs. The square-root form means the optimum is flat near the minimum, so being 20% away from EOQ costs only a few per cent more.
Because the cost curve is flat around the optimum, EOQ is best used as a sanity check on order size rather than a figure to follow to the unit.
This calculator takes 4 inputs: Annual demand, Cost to place one order, Cost per unit, Annual holding cost rate. The pre-filled defaults are a realistic starting point — replace them with figures from your own environment for a result you can act on.