Economic Order Quantity (EOQ) Calculator

How this is calculated

The economic order quantity is the reorder size where the cost of placing orders and the cost of carrying stock are in balance. Order more often and holding cost falls but ordering cost rises; order in bigger batches and the reverse happens. EOQ sits at the bottom of that trade-off curve.

Where D is annual demand in units, S is the cost to place one order, and H is the cost to hold one unit for a year. At the EOQ, annual ordering cost and annual holding cost are equal, which is why the split bar above sits near 50/50. Unit cost is optional here and does not change the EOQ itself; it is a handy reference for valuing the average on-hand inventory.

What this model assumes

• Steady, known demand. The classic EOQ assumes demand is constant and predictable across the year. Seasonal or lumpy demand breaks that assumption.
• Constant costs. Ordering cost and per-unit holding cost are treated as fixed. Volume discounts, freight breaks, and tiered storage are not modeled.
• Instant replenishment, no stockouts. Orders arrive in full when needed, with no lead-time variability and no backorders.
• A starting point, not a mandate. The curve near the minimum is flat, so order sizes within a reasonable range of EOQ cost about the same. Round to a practical case or pallet quantity.

EOQ tells you how much to order; to decide when to order and how much buffer to keep, pair it with the safety stock and reorder point calculator and size the true cost of holding stock with the inventory carrying cost calculator. For the operational context, see the lean manufacturing guide.