Economic order quantity (EOQ) calculator
Find the order size that balances the cost of placing orders against the cost of holding stock. Enter annual demand, what it costs you to place one order, and what it costs to hold one unit for a year. The calculator returns the EOQ, how many orders that means per year, and the total annual cost.
Admin, handling and inbound freight per order
Storage, capital and obsolescence
EOQ is the order size where ordering cost and holding cost are balanced. It assumes steady demand and a fixed cost per order, so treat it as a starting point to sanity-check your current order size rather than a rule.
The trade-off EOQ resolves
Order in large quantities and you place fewer orders, but you carry more stock and tie up more cash. Order in small quantities and you hold less, but you pay the ordering cost more often and lose volume pricing.
EOQ is the square root of two times annual demand times the cost per order, divided by the annual holding cost per unit. It is the point where those two costs are equal, which is also where their total is lowest.
Getting the two cost inputs honest
Cost per order is not just the freight. It is the time to raise and approve the purchase order, chase the supplier, receive and check the goods, and match the invoice. For most SMEs that is far higher than they assume, which pushes the EOQ up.
Holding cost per unit per year is storage, the cost of the capital tied up, insurance, and obsolescence. For anything with a shelf life or a technology curve, obsolescence dominates and the EOQ comes down sharply.
Treat it as a check, not a rule
EOQ assumes steady demand, a constant cost per order and no volume discounts. Real purchasing has all three. Use it to sanity-check the order size you use today: if EOQ says 400 and you habitually order 2,000, that gap is worth understanding.
Questions
What is the EOQ formula?
EOQ is the square root of (2 × annual demand × cost per order) ÷ annual holding cost per unit.
What costs go into the cost per order?
Everything triggered by placing an order: raising and approving the purchase order, chasing the supplier, inbound freight, receiving and inspecting the goods, and matching the supplier invoice.
Does EOQ work with volume discounts?
Not directly. The basic formula assumes a constant unit price. With price breaks you compare the total cost at the EOQ against the total cost at each discount quantity and pick the lower.
A calculator answers one question once. Digital 9 Labs builds the system that answers it continuously — your real numbers, updated as the work happens, without anyone reopening a spreadsheet.