Purchasing & cost

EOQ Calculator

Estimate the order quantity that balances annual ordering cost against annual holding cost for steady demand.

Calculations run locally in your browser.

Inputs

Use annual figures for one SKU or a defined inventory pool, on a consistent yearly basis.

Try an example

Illustrative inputs, not customer data.

Annual demand

units/year

Units sold or shipped per year for the SKU or pool you are planning.

Cost per order

Admin, receiving, and freight cost you incur each time you place a PO.

Holding cost entered as

Annual holding cost per unit

$ / unit / year

Capital, storage, insurance, and obsolescence cost for one unit held for a year.

What this tool estimates

EOQ balances two costs that move in opposite directions. Ordering more often keeps average inventory low but adds per-order cost; ordering less often saves admin and freight but raises the capital, storage, and risk cost of holding stock. The classic formula is EOQ = sqrt((2 × annual demand × cost per order) / annual holding cost per unit).

Inputs to verify

Annual demand should match the SKU or inventory pool you are planning. Cost per order should include the admin, receiving, and freight cost of one purchase order. Annual holding cost per unit should reflect capital, storage, insurance, and obsolescence for one unit over a year, entered either as a dollar amount or as a percentage of unit cost.

How to use EOQ with supplier rules

EOQ is a benchmark order size, not a constraint. Round it up to your supplier MOQ or the nearest case pack when you place a real order, and pair it with a reorder point so timing is covered separately.

Important assumptions

At the EOQ, annual ordering cost and annual holding cost are approximately equal. The model minimizes only their sum; it does not decide when to reorder, protect against demand or lead-time variability, or value volume discounts.

When not to rely on the result alone

Review seasonality, cash availability, storage capacity, shelf life, supplier MOQ above the EOQ, promotions, and your own purchasing policy before ordering. Use the safety stock and reorder point tools for timing and buffer decisions.

Size a purchase order for target coverage, check your reorder point, or read the planning basics.

FAQ

EOQ questions

Does EOQ tell me when to reorder?

No. EOQ sizes orders under steady demand. Use the Reorder Point Calculator or Reorder Planner for timing, and safety stock for variability.

What if my supplier MOQ is larger than the EOQ?

Order at the MOQ when you need stock. The EOQ is a cost benchmark: a big gap between MOQ and EOQ usually signals an expensive holding or ordering trade-off worth reviewing.

Should holding cost be a dollar amount or a percentage?

Either, on a consistent annual basis. A percentage of unit cost is convenient when capital is the dominant cost; a dollar amount per unit lets you add storage, insurance, and obsolescence directly.