Inventory & EOQ Calculator
Optimize your inventory management by calculating the Economic Order Quantity (EOQ) — the ideal order size that minimizes total inventory costs. Balance holding costs against ordering costs to find the sweet spot that keeps your supply chain efficient and your capital free.
Enter your annual demand, ordering cost, and holding cost to determine the most cost-effective order quantity and reorder schedule.
- Free Online Tool
- Instant Results
- No Installation
- Secure & Private
Understanding This Calculator
What Is Economic Order Quantity (EOQ)?
EOQ is a classic inventory management formula that determines the optimal number of units to order each time to minimize the total cost of inventory — including ordering costs and holding (carrying) costs.
The EOQ Formula
- EOQ = √(2 × D × S ÷ H)
Where D = annual demand, S = cost per order, H = holding cost per unit per year.
Example
A retailer sells 10,000 units annually. Each order costs $50 to process, and holding one unit for a year costs $2.
- EOQ = √(2 × 10,000 × 50 ÷ 2) = √(500,000) = 707 units
- Number of orders per year = 10,000 ÷ 707 ≈ 14.1 orders
Related Calculations
- Reorder Point = Daily Usage × Lead Time (in days)
- Safety Stock = Buffer inventory to prevent stockouts during demand spikes
- Total Annual Cost = (D ÷ Q × S) + (Q ÷ 2 × H) where Q is order quantity
How to Use
- Enter your annual demand (total units sold per year).
- Enter the ordering cost (cost to place and receive one order).
- Enter the holding cost per unit per year (storage, insurance, opportunity cost).
- Click Calculate to see your optimal order quantity and order frequency.
Frequently Asked Questions
What costs are included in holding costs?
Holding costs include warehousing/storage fees, insurance, opportunity cost of capital tied up in inventory, depreciation, obsolescence risk, and handling costs. Typically 20-30% of the item's value per year.
What is included in ordering costs?
Ordering costs include purchase order processing, shipping and freight, receiving and inspection, and any setup costs for production orders. These costs occur each time an order is placed, regardless of order size.
When should I NOT use EOQ?
EOQ assumes constant demand and stable costs. It is less suitable for seasonal products, perishable goods, or items with highly variable demand. In these cases, use demand forecasting and safety stock models instead.
How does EOQ save money?
Ordering too frequently increases ordering costs. Ordering too much at once increases holding costs. EOQ finds the order quantity where these two costs are balanced, minimizing total inventory cost.
What is a reorder point?
The reorder point is the inventory level at which you should place a new order. It equals your daily usage rate multiplied by the lead time (days between ordering and receiving). Adding safety stock provides a buffer against delays.