Your Personal Consultant
Back to Tools

Economic Order Quantity (EOQ) Calculator

Optimize your inventory management by finding the ideal order quantity that minimizes total inventory costs.

Total number of units needed per year

$

Fixed cost per order (shipping, handling, setup)

$

Cost to store one unit for a year (storage, insurance, etc.)

$

Cost per unit (for calculating total inventory value)

Results

Fill in the form and click "Calculate" to see your optimal order quantity

Understanding Economic Order Quantity (EOQ)

What is Economic Order Quantity? EOQ is a formula that calculates the optimal order quantity that minimizes total inventory costs, including both ordering and holding costs.

The EOQ Formula: EOQ = √(2DS/H), where:

  • D = Annual demand quantity
  • S = Order cost (per purchase order)
  • H = Annual holding cost per unit

Key Benefits of Using EOQ:

  • Reduces total inventory costs
  • Optimizes inventory levels to prevent stockouts and overstock
  • Creates a consistent ordering schedule
  • Improves cash flow by reducing capital tied up in inventory

Limitations: The EOQ model assumes constant demand, fixed ordering costs, and fixed holding costs. In reality, these variables may fluctuate. The model also doesn't account for quantity discounts or limited storage space.

Implementation Tips

  • Round EOQ to a practical whole number
  • Consider adjusting for supplier minimum order quantities
  • Periodically review and update your EOQ calculations as costs change
  • For seasonal products, calculate EOQ for each season separately

Need more advanced business tools and personalized advice?

Get Started with Your Personal Consultant