Economic Order Quantity
Calculator

EOQ calculates the optimal order size that minimizes the total cost of ordering and holding inventory: EOQ = sqrt((2 x D x S) / H), where D is annual demand, S is the cost per order, and H is the annual holding cost per unit.

Ordering too often racks up repeated ordering costs (processing, shipping, administrative overhead) even though each order is small, while ordering too rarely means holding large amounts of inventory for longer, increasing storage, insurance, and obsolescence costs. EOQ finds the order size where these two opposing cost pressures are balanced.

The classic EOQ formula assumes constant, known demand, fixed ordering and holding costs, instantaneous restocking, and no quantity discounts — assumptions that rarely hold perfectly in real supply chains, which is why EOQ is treated as a useful starting benchmark rather than an exact prescription.

Higher holding costs per unit push the optimal order quantity down, since the formula's holding cost term sits in the denominator — it becomes cheaper to order more frequently in smaller batches when storing each unit is expensive.

The basic EOQ model works best with relatively steady, predictable demand; for highly seasonal or volatile products, more advanced inventory models that account for demand variability and safety stock are typically more accurate than the classic EOQ formula.