EOQ calculator (economic order quantity)

The economic order quantity is the order size that keeps the combined cost of placing orders and holding stock as low as possible. Enter your annual demand and costs to find yours, and see what your current order size costs you.

Your numbers

Admin time, freight and receiving for one order, not the price of the goods.

Storage, insurance, the cost of the money tied up, damage and shrinkage. 20–30% is typical.

Result

Economic order quantity 949 units per order
Orders a year 12.6 one about every 29 days

Ordering 3,000 at a time costs $3,300 a year, $1,403 more than ordering the EOQ.

Holding cost per unit per year
$2.00
Annual ordering cost at EOQ
$949
Annual holding cost at EOQ
$949
Total annual cost at EOQ
$1,897

The EOQ formula

EOQ = √(2 × D × S ÷ H)

  • D is annual demand in units.
  • S is the cost of placing one order: admin time, freight and receiving, but not the goods themselves.
  • H is the cost of holding one unit for a year, usually the unit cost times a holding rate.

Small orders mean many orders, so ordering costs rise; large orders mean more stock sitting on the shelf, so holding costs rise. EOQ is the point where the two are balanced, and at that size they are exactly equal.

Worked example

A business sells 12,000 units a year. Each order costs $75 to place and receive, each unit costs $8, and holding stock costs 25% of its value a year.

  1. Holding cost per unit: $8 × 25% = $2.00 a year.
  2. EOQ: √(2 × 12,000 × 75 ÷ 2) = 948.7, so 949 units per order.
  3. That is 12.6 orders a year, one about every 29 days, for a total of $1,897 a year in ordering and holding costs.

If the business keeps ordering 3,000 units at a time, it places only four orders a year but holds far more stock: $3,300 a year in total, $1,403 more than ordering the EOQ.

When to adjust the EOQ

  • Pack sizes and minimum order quantities. Round the EOQ to the nearest case or pallet. The total cost curve is flat near the minimum, so rounding costs very little.
  • Price breaks. If a supplier discounts larger orders, compare the total yearly cost including the purchase price at each break, not just ordering and holding.
  • Seasonal demand. EOQ assumes steady demand through the year. For seasonal items, work it out per season using that season's demand rate.

EOQ and the reorder point work together

EOQ answers how much to order. The reorder point answers when: the stock level at which that order goes out. Use both and every order arrives at a predictable size, just as the previous delivery runs down.

Frequently asked questions

What does EOQ stand for?

EOQ stands for economic order quantity: the order size that minimises the total of ordering costs and holding costs over a year.

What goes into the cost of placing an order?

Everything an order costs regardless of its size: purchasing time, freight charges that do not scale with quantity, receiving and inspection, and processing the supplier's invoice.

What is a typical holding cost percentage?

Most businesses land between 20% and 30% of the unit cost per year, once storage, insurance, the cost of the money tied up, damage and shrinkage are added together.

What if my supplier has a minimum order quantity?

If the minimum is above your EOQ, order the minimum: it is the cheapest size you are allowed. If it is below, order the EOQ rounded to the supplier's pack size.

Does EOQ work when demand changes?

It works best with fairly steady demand. When demand trends or swings with the seasons, recalculate it as the forecast changes. Arkenso Inventory Forecasting does this per SKU automatically.

Last reviewed 2026-10-17.

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