Economic order quantity (EOQ)
The order size that balances the cost of placing orders against the cost of holding stock.
Holding cost per unit per year (H) = Unit cost × Holding rate
EOQ = √( 2 × Annual demand × Cost per order ÷ H )
Annual cost = (Annual demand ÷ EOQ) × Cost per order + (EOQ ÷ 2) × H
Order rarely and you pay to store large batches; order often and you pay for paperwork, receiving and freight every time. The economic order quantity is the batch size where those two annual costs are equal, which is also where their sum is lowest.
The curve around the optimum is flat. Ordering 20 percent more or less than the calculated quantity raises the total cost by under two percent, so rounding to a full pallet or a supplier's pack size is almost always the right decision.
Calculator
The fields start with a worked example. Replace them with your own figures; the results update as you type.
- Holding cost
- 2.64 per unit / yr
- Economic order quantity
- 1,243 units
- Orders placed
- 19.3 orders / yr
- Time between orders
- 18.9 days
- Ordering + holding cost
- 3,282 per year
How to read it
Treat the result as a starting point for a conversation with the supplier, not as a rule. Minimum order quantities, price breaks and shelf life routinely override it.
Common mistakes
- The cost per order should include only costs that change with the number of orders, not the buyer's salary.
- A holding rate under 15 percent usually means storage, insurance, obsolescence or capital cost was left out.
- The model assumes steady demand. For seasonal items calculate it per season or use a period-based method.
Last reviewed 11 May 2026.