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Inventory and ordering
EOQ calculator: how much to order each time
Enter your yearly demand, the cost of placing one order and the cost of holding one unit for a year. You get the order size that keeps total cost lowest.
The economic order quantity is the square root of two times yearly demand times the cost per order, divided by the yearly holding cost per unit. At the default numbers it is about 671 units per order.
Written by Procurement VMS Editorial Team · Reviewed by Michael, Procurement Advisor Expert · Updated
Your numbers
The boxes start with an example so you can see how it works. Replace them with your own figures.
Your result
Order about 671 units each time, which means a new order roughly every 20 days. At that size ordering and holding cost are equal at USD 1,342 each, and the USD 2,683 total is the lowest these inputs allow.
| Economic order quantity | 671 units per order |
|---|---|
| Orders per year | 17.9 orders |
| Days between orders | 20 days |
| Yearly ordering cost | USD 1,342 |
| Yearly holding cost | USD 1,342 |
| Lowest total of the two | USD 2,683 |
The currency box changes the label only. Enter amounts in the currency you choose.
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- PDF guide with the formula, a worked example and a checklist of what to enter
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The files open with the example numbers from the page. Type yours over the blue cells in the Excel file. The calculator on this page is free to use without a form.
How the EOQ calculator works
The formula
EOQ = square root of (2 x D x S / H), where D is yearly demand, S is the cost of one order and H is the yearly holding cost per unit.
EOQ answers one question: what order size makes the sum of ordering cost and holding cost smallest. Order too often and you pay the order cost again and again. Order too much and you pay to store and finance stock that sits.
The model assumes steady demand, a fixed cost per order and a price that does not change with quantity. Real demand wobbles, so treat the answer as the centre of a range. Ordering 10 percent above or below the EOQ changes total cost by very little, which gives you room to round to a pack size or pallet.
The example numbers are illustrative and are not benchmarks. Use your own data for any decision.
How to use it with your own data
- Take yearly demand from the last 12 months of usage, not from a forecast you have doubts about.
- Add up what one order really costs: requisition, approval, buyer time, receiving and invoice matching. A purchase order cost calculator helps if you have never measured it.
- Build the holding cost from capital, storage, insurance and shrinkage. The inventory carrying cost calculator gives you a rate to use.
Mistakes that skew the answer
Using the unit price as the holding cost
Holding cost is a share of what the stock costs you each year, plus storage. It is not the price of the item. A USD 40 item with a 20 percent holding rate costs USD 8 a year to hold.
Leaving out the real order cost
Teams often enter only the freight or the buyer minutes. Approvals, receiving and invoice matching belong in the number, and they push the order cost higher and the EOQ up.
Ignoring supplier minimums and price breaks
If the supplier sells in cartons of 500 or gives a better price at 1,000, the model above does not know. Use the volume discount calculator to test the break.
What to do with the result
Round the result to the pack size your supplier ships, then set the reorder trigger with the reorder point calculator. Put the new order size into your purchase order template and check it again each time demand or cost per order moves by about a fifth.
Questions about the EOQ calculator
What does EOQ stand for?
EOQ stands for economic order quantity. It is the order size that gives the lowest combined cost of placing orders and holding stock for a year.
Is EOQ still useful when demand changes through the year?
Yes, as a starting point. Calculate it on average demand, then add safety stock for the swings. Large seasonal changes call for a separate calculation per season.
Does EOQ include the purchase price?
Not in the basic formula. The price only matters when it changes with order size, which is a different test. Use the volume discount break-even page for that.
How do I find my cost per order?
Add the staff time and system cost for one order from requisition to payment, then divide by the number of orders in a year. Check it against your own records, since it is often higher than assumed.