Free EOQ Calculator
EOQ Calculator
Calculate your Economic Order Quantity to minimize total inventory costs. Includes reorder point, cost curves, and savings analysis.
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Calculate the economic order quantity that minimizes your total inventory costs. Enter annual demand, ordering cost, and holding cost to find the optimal order size, reorder point, total costs, and savings vs. your current order quantity. Includes a visual cost curve showing the sweet spot where ordering and holding costs intersect.
How to Calculate Economic Order Quantity
- 1
Enter annual demand
Total units your business sells or uses per year. Use last year's actuals or your forecast.
- 2
Set ordering and holding costs
Ordering cost = what it costs to place one order (shipping, processing, receiving). Holding cost = annual cost to store one unit (warehousing, insurance, obsolescence).
- 3
Add lead time and safety stock
Optional: enter your supplier lead time in days and any safety stock buffer. The calculator will compute your reorder point — when to place the next order.
- 4
Compare to current ordering
Enter your current order quantity to see how much you'd save by switching to EOQ. The cost curve chart shows exactly why EOQ minimizes total cost.
Why EOQ Matters for Your Business
Stop guessing order sizes
Most small businesses order inventory by gut feel. EOQ uses a proven formula to find the exact order size that minimizes total cost — balancing the tradeoff between ordering frequently (expensive) and holding too much inventory (also expensive).
Free up working capital
Ordering too much ties up cash in inventory. Ordering too little means constant reorders and rush shipping. EOQ finds the balance that keeps your cash working for you instead of sitting on shelves.
Reduce stockouts
The reorder point calculation tells you exactly when to place your next order based on lead time and safety stock. No more guessing, no more "we ran out" emergencies.
See the math visually
The U-shaped cost curve makes it click — ordering costs go down as order size increases, holding costs go up, and total cost has one clear minimum. That minimum is your EOQ.
Frequently Asked Questions
What is the EOQ formula?
EOQ = √(2DS/H) where D is annual demand, S is cost per order, and H is annual holding cost per unit. It's derived by minimizing the total inventory cost function (ordering cost + holding cost). The formula assumes constant demand and lead time.
What costs go into ordering cost?
Ordering cost includes everything involved in placing and receiving one order: purchase order processing, shipping fees, receiving/inspection labor, quality checks, and any per-order administrative costs. Do NOT include the cost of the goods themselves — that's separate.
What is a reorder point?
The reorder point is the inventory level at which you should place a new order. It's calculated as (daily demand × lead time in days) + safety stock. When your on-hand inventory drops to this level, order your EOQ quantity to avoid stockouts.
Does EOQ work for businesses with variable demand?
EOQ assumes relatively stable demand. For highly seasonal or volatile demand, consider using EOQ as a baseline and adjusting seasonally. Many businesses recalculate EOQ quarterly with updated demand figures. For very irregular demand, consider a min-max or periodic review system instead.
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