EOQ Calculator (Economic Order Quantity)

EOQ in inventory planning

The economic order quantity model is a classic inventory planning tool that helps you choose an order size that minimizes the tradeoff between ordering and holding. Ordering costs include the work to create a purchase order, approve the buy, schedule the receipt, and handle payment. Holding costs represent the annual cost of carrying inventory, including warehousing, capital tied up in stock, shrink, and obsolescence. When those two forces are balanced, the EOQ gives a stable, repeatable order quantity that reduces overall cost for a steady-demand item.

In practice, EOQ is most useful for SKUs with predictable demand and stable lead times. The model assumes that demand is relatively constant across the year and that you can place an order that arrives all at once. While real supply chains are more complex, EOQ remains a solid baseline that helps planners standardize replenishment policies and compare ordering strategies. If you have meaningful demand variability or long, uncertain lead times, you should pair EOQ with a safety stock policy and a reorder point policy. EOQ answers the question "how much should I order?" while safety stock and reorder point answer "when should I order?"

This calculator also converts the EOQ into an order frequency and an order interval. Those outputs are operationally helpful because they translate an abstract unit quantity into a practical cadence you can plan for on a calendar. For example, if the EOQ is 1,200 units and you sell 24,000 units per year, you will place roughly 20 orders per year, or one order every 12 to 13 working days. If that cadence does not fit supplier constraints or warehouse capacity, you can revisit your ordering cost estimate, your holding cost estimate, or your practical lot-size constraints.

The EOQ model is cost-focused, not service-focused. That means it does not directly address service level, fill rate, or peak season risks. Use it as a foundation, then layer on safety stock, lead time variability, and supplier minimums to build a policy that is both cost aware and service resilient. Because this tool is client-side, you can test multiple scenarios quickly and keep sensitive inventory costs private.

Formula

EOQ: EOQ = sqrt((2 * D * S) / H)

Orders per year: D / EOQ

Order interval (days): Working days per year / (D / EOQ)

Annual ordering cost: (D / EOQ) * S

Annual holding cost: (EOQ / 2) * H

How to calculate EOQ

1. Enter annual demand, the number of units sold or used in a year.
2. Enter ordering cost, the fixed cost of placing one purchase order excluding product cost.
3. Enter annual holding cost per unit, or calculate it from unit cost and carrying cost percentage.
4. Substitute D, S, and H into EOQ = sqrt((2 * D * S) / H).
5. Compare the theoretical EOQ with minimum order quantity, order multiples, and capacity limits to choose a feasible lot size.

EOQ assumptions and limitations

The classic EOQ model assumes constant demand, fixed ordering cost, fixed holding cost, instant replenishment, no quantity discounts, no stockouts, and a single-SKU calculation. Those assumptions make EOQ a clean baseline, but they also mean it should not be the only policy for volatile or constrained inventory.

When assumptions fail, adapt the result. Use safety stock and a reorder point when demand or lead time varies, run seasonal EOQ scenarios when demand changes by period, compare price breaks separately when quantity discounts apply, and use lot constraints when suppliers or warehouse capacity prevent ordering the exact EOQ.

Example calculation

Suppose annual demand is 24,000 units, the ordering cost is $75 per order, and holding cost is $2.50 per unit per year. EOQ is:

EOQ = sqrt((2 * 24000 * 75) / 2.5) = sqrt(1,440,000) = 1,200 units.

Orders per year are 24000 / 1200 = 20, so the order interval is roughly 250 / 20 = 12.5 working days. Annual ordering cost is 20 * 75 = $1,500, and annual holding cost is (1200 / 2) * 2.5 = $1,500. The EOQ balances those two costs.

FAQs

How do you calculate EOQ?

Use EOQ = sqrt((2 * annual demand * ordering cost) / annual holding cost per unit). The calculator substitutes your D, S, and H values and computes the order quantity that minimizes relevant ordering and holding costs.

What do D, S, and H mean in EOQ?

D is annual demand in units, S is the fixed cost to place one purchase order, and H is the annual holding or carrying cost for one unit.

Does EOQ include purchase cost?

Classic EOQ excludes product purchase cost when the unit price does not change by order size. Include purchase cost separately when quantity discounts or price breaks matter.

What does it mean if EOQ is high or low?

A higher EOQ usually means demand or ordering cost is high relative to holding cost. A lower EOQ usually means holding cost is high or ordering cost is low.

What are the limitations of EOQ?

EOQ assumes steady demand, fixed ordering and holding costs, instant replenishment, no stockouts, no quantity discounts, and one SKU at a time. Real policies may also need safety stock, reorder points, or lot constraints.

What is the difference between EOQ and reorder point?

EOQ estimates how much to order. Reorder point estimates when to order by considering demand during lead time and safety stock.

Can EOQ handle seasonal demand?

Use separate EOQ scenarios for each season or demand period when demand is not steady across the year.

How does EOQ work with a minimum order quantity?

Calculate the theoretical EOQ first, then compare it with the supplier minimum, order multiple, and capacity limit. The recommended quantity should be the nearest feasible lot size and the cost difference should be reviewed.

How often should EOQ be recalculated?

Recalculate EOQ when demand, ordering cost, holding cost, supplier minimums, case packs, or storage constraints change. Many teams review it quarterly or after major demand shifts.

Is this calculator private?

Yes. All calculations run locally in your browser with no data sent to a server.

How it works

This calculator uses the classical EOQ model to balance annual ordering and holding costs. Inputs are validated in the browser, and the results are computed instantly without sending any data to a server.

Disclaimer

EOQ results are estimates based on the inputs provided and standard assumptions. Validate outcomes against supplier constraints, minimum order quantities, and service level policies.