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EOQ calculator
Calculate the economic order quantity: the order size that balances the cost of placing orders against the cost of holding stock. See orders per year, order cycle, and total cost.
Result
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units per order (EOQ)
- Orders per year
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- Days between orders
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- Holding cost per unit per year
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- Annual ordering cost
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- Annual holding cost
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- Total annual cost
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At the EOQ, the yearly ordering cost and the yearly holding cost are equal.
Size orders for every SKU from a forecast, with pack sizes applied: try Varox free.
EOQ formula
EOQ = √( 2 × D × S / H )
- D is annual demand in units.
- S is the cost of placing and receiving one order.
- H is the cost of holding one unit in stock for a year, often unit cost × a holding rate.
Ordering more at a time means fewer orders but more average stock; ordering less means lower stock but more orders. The EOQ is the point where the two yearly costs meet.
Worked example
A SKU sells 12,000 units a year. Each order costs 50 to place and receive, the unit cost is 8, and holding stock costs 25% of its value a year, so H = 8 × 25% = 2.
EOQ = √( 2 × 12,000 × 50 / 2 ) = √600,000 ≈ 775 units
- Orders per year: 12,000 ÷ 775 ≈ 15.5, about one every 23–24 days.
- Ordering cost: 15.5 × 50 ≈ 775 a year.
- Holding cost: 775 ÷ 2 × 2 ≈ 775 a year.
- Total: about 1,549 a year. Any other order size costs more.
Estimating holding cost
Holding cost is the cost most teams underestimate. It includes the cost of capital tied up in stock, warehouse space and handling, insurance, shrinkage and damage, and obsolescence for products that go out of season or out of date. A yearly rate of 20–30% of unit cost is a common starting point; fashion, electronics, and perishable goods often run higher.
When EOQ is the wrong answer
- Minimum order quantities and pack sizes. Round to them; the cost curve is flat, so it costs little.
- Quantity discounts. Compare total cost including the purchase price at each price break.
- Seasonal or trending demand. A yearly average hides the months that matter. Size orders from the forecast for the months each order covers.
- Shelf life and space. An order larger than you can sell before expiry or store is never economic.
From EOQ to weeks of cover
Divide the EOQ by monthly demand to express it as cover: 775 ÷ 1,000 units a month ≈ 0.8 months, or about 23 days. That number is a sensible starting point for the delivery coverage window in a forecast-driven planner. In Varox, each delivery is sized to cover that window of forecast demand plus the safety buffer and rounded to the SKU's pack size.
Order quantities for every SKU
Turn a sales and stock spreadsheet into a month-by-month order plan with coverage and pack sizes applied. Free for up to 10,000 active SKUs.
Questions
What does EOQ stand for?
Economic order quantity: the order size that minimises the combined yearly cost of placing orders and holding stock.
What does the EOQ model assume?
Steady demand through the year, a fixed cost per order, a holding cost proportional to average stock, delivery of the full quantity at once, and no quantity discounts or capacity limits.
How do quantity discounts change the EOQ?
Calculate the EOQ, then compare its total cost, including the purchase price, with the total cost at each discount break. If ordering up to a break saves more on price than it adds in holding cost, order the break quantity.
Do I have to order exactly the EOQ?
No. Total cost is flat around the EOQ: ordering 20% more or less raises it by only about 2–3%. Rounding to a pack size, a pallet, or the supplier's minimum order costs very little.
Is EOQ still useful if demand is seasonal?
As a yearly average, yes: it tells you roughly how many orders a year make sense. For the timing and size of each order in a seasonal year, plan from a monthly forecast instead.