Economic order quantity calculator
The order size where ordering and holding costs balance.
Formula
EOQ = √(2 × annual demand × setup cost ÷ annual holding cost per unit)
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Economic order quantity
3,674
units per order
Worked example
48,000 units of annual demand, $450 to place an order, and $3.20 a year to hold a unit gives an EOQ of 3,674.23 units, or about thirteen orders a year. Double the ordering cost and the quantity rises only about 41%, because the square root flattens whatever you feed it.
When you reach for this
A sanity check on a reorder quantity somebody picked years ago and nobody has revisited. Run it when either freight terms or storage costs change materially.
How to read the number
EOQ assumes steady demand and a fixed ordering cost, so treat it as a starting point rather than an answer. Seasonal businesses and anything with supplier minimums or freight breaks push the number upward.
Metrics that travel with it
Questions operators ask about this metric
What does EOQ assume?
Steady demand, a fixed cost per order, and a constant holding cost. Seasonality, supplier minimums, and freight breaks all violate those assumptions and push the true order quantity upward.
What goes into the ordering cost?
Everything a purchase order costs you regardless of its size: buyer time, transmission, receiving setup, and inspection. Freight belongs here only when it does not vary with quantity.
How do I estimate the holding cost?
Storage, capital, insurance, shrink, and obsolescence for one unit for one year. Obsolescence is the component most often left out, and for fashion or perishables it dominates the rest.
Should I order exactly the EOQ?
Round to a case, pallet, or container quantity. The cost curve near the optimum is nearly flat, so rounding to a shippable unit costs almost nothing and saves handling.
Stop calculating this by hand
Every number on this page comes out of data you already have — orders, shipments, inventory, deductions. Endless keeps those in one source of truth instead of four exports, so the metric updates on its own and agents watch it for you.