EOQ Calculator

What Is Economic Order Quantity?

Economic Order Quantity (EOQ) is the order size that minimizes the total annual cost of holding and ordering inventory. The formula — EOQ = √(2DS/H) — was first published by Ford Harris in 1913 and remains the backbone of inventory theory today. D is annual demand, S is the fixed cost to place each order (setup, freight-in, receiving, paperwork), and H is the cost to hold one unit in inventory for one year (capital, storage, shrink, obsolescence).

Why the Curve Is Flat

At the EOQ, annual ordering cost exactly equals annual holding cost. This is the mathematical property that makes the total-cost curve nearly flat across a wide range around the optimum — being 20% off from the true EOQ typically only raises total cost by 1–2%. In practice this means you can round to a convenient pack, case, or pallet quantity without leaving much money on the table. Use the calculator output as a ballpark, not a mandate.

What EOQ Does Not Cover

Classic EOQ assumes constant demand, instantaneous replenishment, no stockouts, no quantity discounts, and no capacity constraints. Real purchasing decisions involve lead-time variability (use the Safety Stock Calculator alongside this), volume discounts (EPQ and price-break extensions), multi-echelon warehousing, shelf-life constraints, and supplier minimums. EOQ is a starting point — use it to sanity-check your current order cadence and to prioritize which SKUs are worth a deeper look.

Automating Reorder Decisions

Running EOQ on a spreadsheet once a year is fine for a small assortment. If you carry thousands of SKUs across multiple locations, you need a purchasing system that calculates reorder points from live demand and lead-time data, recomputes EOQ as demand patterns shift, and alerts buyers when stock approaches the trigger. Learn about integration services, custom reporting, or get in touch.