EOQ Calculator

The EOQ (Economic Order Quantity) Calculator finds the order size that minimizes your total inventory cost — the sweet spot between ordering too often (racking up ordering costs) and ordering too much at once (racking up holding costs).

What is EOQ?

EOQ is the classic inventory-management formula:

EOQ = √(2 × D × S / H)

• D — annual demand, in units
• S — ordering cost, the fixed cost of placing one order (paperwork, shipping, setup)
• H — holding cost, the annual cost of storing one unit (warehousing, insurance, spoilage, capital tied up)

As order size grows, ordering cost per year falls (fewer orders) but holding cost rises (more average inventory sitting around). EOQ is the exact point where those two costs are equal and their sum is lowest.

How to use it

1. Enter your annual demand — how many units you expect to sell or use in a year.
2. Enter the ordering cost — what it costs to place one order, regardless of size.
3. Enter the holding cost — what it costs to hold one unit in stock for a year.
4. Optionally, enter a lead time (days between placing an order and receiving it) and a safety stock buffer to also get a reorder point — the stock level that should trigger your next order.

The calculator returns the EOQ itself, how many orders you'd place per year, the number of days between orders, the annual ordering and holding costs at that quantity, and the total annual inventory cost.

Why not just order once a year, or order one unit at a time?

Ordering once a year minimizes ordering cost but maximizes holding cost (you're sitting on a full year of stock). Ordering constantly minimizes holding cost but maximizes ordering cost (fees/setup on every tiny order). EOQ balances the two — it's a minimum on the total cost curve, not on either cost alone.

Does EOQ account for demand changes or discounts?

No — the classic formula assumes constant demand, a fixed ordering cost, and a fixed per-unit holding cost, with no quantity discounts or stockouts. It's a solid starting baseline for steady-demand inventory; for seasonal demand or bulk-discount pricing, treat the result as a reference point rather than a hard rule.

Running a related profitability calculation? Try the Break-Even Point Calculator to find how many units you need to sell to cover fixed and variable costs.