Last updated October 13, 2026 · Report an error
Economic Order Quantity (EOQ) is the order size that minimizes the combined cost of placing orders (which favors ordering rarely, in bulk) and holding inventory (which favors ordering often, in small amounts). It's a classic inventory-management formula for finding that balance.
How it works
Enter your annual demand in units, the fixed cost of placing one order, and the annual holding cost per unit. The calculator applies EOQ = √((2 × D × S) / H), and also reports how many orders per year that implies and roughly how many days between orders.
- Enter annual demand (units).
- Enter order cost per order ($).
- Enter holding cost per unit per year ($).
- Click Calculate to see your results.
Examples
A moderate-demand product
With 1,000 units of annual demand, a $50 cost per order, and a $2 annual holding cost per unit, the EOQ is about 224 units — ordering roughly 4.5 times a year, about every 82 days.
Who should use it
- Retail and manufacturing inventory ordering decisions.
- Operations management coursework on inventory theory.
Industry applications
- Retail and e-commerce inventory management
- Manufacturing and supply chain operations
Advantages
- Simple, well-established formula for balancing ordering and holding costs.
- Also reports practical figures like orders per year and days between orders.
Limitations
- Assumes steady demand and instant replenishment — doesn't itself account for demand variability or lead time.
Common mistakes to avoid
- Underestimating holding cost by only counting storage space and ignoring capital, insurance, or obsolescence risk.
- Treating EOQ as a complete ordering policy on its own — real systems typically add safety stock for demand variability and lead time, which EOQ alone doesn't account for.
Best practices
- Include all real components of holding cost (not just physical storage) for an accurate result.
- Use EOQ as a starting point, then layer in safety stock separately if demand or lead time varies.
Tips
- If your demand is seasonal or unpredictable rather than steady, treat the EOQ result as a rough guide and add a safety-stock buffer rather than following it exactly.