What is the EOQ formula?

EOQ = sqrt(2 × D × S / H), where D is annual demand (units), S is the fixed cost per order, and H is the annual holding cost per unit. This is also called the Wilson formula.

What counts as a holding cost?

Holding costs include warehousing rent, insurance, spoilage, obsolescence risk, and the opportunity cost of capital tied up in inventory. A common estimate is 20–30% of unit cost per year.

What counts as an ordering cost?

Ordering costs are fixed costs per purchase order: shipping and freight, purchase order processing, supplier communication, and receiving/inspection labor. Variable unit costs are excluded.

Does EOQ assume constant demand?

Yes. The classic Wilson EOQ model assumes steady, known demand and instantaneous replenishment. For seasonal or variable demand, EOQ gives a useful baseline but should be adjusted with safety stock.

How do I use the reorder interval?

If the reorder interval is 30 days, place a new order every 30 days (or whenever stock drops to the reorder point if lead times apply). Combine EOQ with your supplier lead time for a complete reorder policy.

Why does a lower holding cost increase EOQ?

Lower holding cost means it is cheaper to store units, so it becomes more economical to buy in larger batches and order less frequently. Conversely, high holding costs push toward smaller, more frequent orders.

Economic Order Quantity Calculator

Name: Economic Order Quantity Calculator
Availability: InStock
Author: Nham Vu

Enter annual demand, ordering cost, and holding cost to find the order quantity that minimizes your total inventory costs.

Inventory Inputs

Annual Demand (units/year)

Total units sold or consumed per year.

Ordering Cost (per order, $)

Fixed cost each time you place an order (shipping, admin, etc.).

Annual Holding Cost (per unit, $)

Annual cost to store one unit (warehouse, insurance, etc.).

Unit Purchase Cost (optional, $)

Used to calculate total annual purchase cost.

Enter your inventory figures and click Calculate to see the optimal order quantity.

Summary

Enter annual demand, ordering cost, and holding cost to find the order quantity that minimizes your total inventory costs.

How it works

Enter the annual demand — the total number of units you sell or consume per year.
Enter the ordering cost — the fixed cost incurred each time you place an order (shipping, admin, etc.).
Enter the holding cost — the annual cost to store one unit (warehousing, insurance, opportunity cost).
The tool applies the Wilson EOQ formula: EOQ = sqrt(2 × D × S / H).
Results show the optimal order quantity, number of orders per year, reorder interval, and total annual cost.

Use cases

Determine how many units to order at a time to minimize inventory costs.
Calculate reorder points for supply chain planning.
Compare ordering strategies for different product categories.
Reduce warehousing costs by avoiding over-ordering.
Support procurement decisions with data-driven order quantities.
Plan cash flow by understanding order frequency and spend per order.

Frequently Asked Questions

Last updated: 2026-07-01 · Reviewed by Nham Vu