Free economic order quantity calculator (EOQ)

Enter your own numbers, click the button and read the result. These tools give estimates for planning only. They use simplified formulas and the figures you enter, so check important decisions against your own data and advisers.

Every order has a cost to place and receive it, and every unit you hold has a cost to store and finance. Ordering in large lots means fewer orders but more stock to hold; ordering in small lots means more orders but less stock. The economic order quantity is the order size where the two annual costs are equal, which gives the lowest combined cost under the model's assumptions.

From the EOQ the calculator works out how many orders you would place a year, the time between orders, and the annual ordering and holding costs. At the EOQ the annual ordering cost and the annual holding cost are equal, so the total annual cost is twice either one.

Worked example

This is an example only, using made-up round numbers to show the arithmetic. They are not benchmarks, and the results were produced by this page's calculator script.

Inputs: annual demand D = 12,000 units, cost per order S = 75, holding cost H = 3 per unit per year, 365 days per year, unit cost left blank.

Results:

• EOQ: 774.6 units
• Orders per year: 15.49
• Order cycle time: 23.6 days
• Annual ordering cost: 1,161.90
• Annual holding cost: 1,161.90
• Total annual cost (ordering + holding): 2,323.79

This economic order quantity calculator is most useful when:

• You buy an item repeatedly at a fairly steady rate and want a sensible starting order size.
• You suspect you are ordering too often, or holding too much, and want to see the cost trade-off.
• Order setup costs or holding costs have changed and you want to re-check your batch sizes.
• You want a baseline order quantity to compare with supplier minimums or pack sizes.

If the numbers point to a bigger question, such as which suppliers, inventory policies or logistics routes to change, our supply chain consulting can help you work through it.

What is economic order quantity (EOQ)?

Economic order quantity is the order size that minimizes the combined annual cost of placing orders and holding inventory, under a simple model with steady demand and fixed costs.

What is the EOQ formula?

EOQ = sqrt(2 x D x S / H), where D is annual demand in units, S is the cost of placing one order and H is the holding cost per unit per year.

How do I estimate ordering cost and holding cost?

Ordering cost is what one order costs you to place, receive and process, including setup if you make the item yourself. Holding cost per unit per year is typically the unit cost times your carrying cost rate, covering capital, storage, insurance and handling.

Should I order exactly the EOQ?

Not necessarily. Round to pack sizes, pallet quantities and supplier minimums. Total cost changes slowly near the EOQ, so a nearby quantity that fits your constraints is often a reasonable choice.

What are the limits of the EOQ model?

It assumes steady demand, fixed ordering and holding costs, instant replenishment and no quantity discounts or stockouts. If those are far from your situation, treat the result as a starting point and pair it with safety stock.

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