Economic Order Quantity Calculator

An Economic Order Quantity calculator finds the order size that keeps your combined ordering and holding costs as low as possible for a given product. It is one of the oldest formulas in inventory management, first published by Ford W. Harris in 1913, and it still holds up today for any product with reasonably steady demand.

The tradeoff EOQ is built to solve

Ordering in small, frequent batches keeps storage costs low but racks up ordering costs from all the extra purchase orders, shipments and receiving labor. Ordering in large, infrequent batches does the opposite: fewer orders means lower ordering cost, but more inventory sitting in the warehouse means higher holding cost. EOQ is the order quantity where these two costs cross, which is also where their sum is smallest.

Getting good numbers into the formula

Annual demand should come from actual sales history for the product, not a rough guess, since EOQ is only as reliable as the demand figure behind it. Ordering cost should include every fixed cost tied to placing one order, not per unit, while holding cost per unit per year is often estimated as a percentage of the unit's value, commonly somewhere in the 15% to 30% range once storage, insurance and capital cost are factored in, though the right figure varies by business.

Where the classic EOQ formula falls short

EOQ assumes demand and lead time are steady, which rarely holds exactly true for seasonal products, fast-growing SKUs or anything affected by supplier disruptions. For those cases, EOQ is still a reasonable starting point, but it works best recalculated per season or paired with a safety stock buffer to absorb demand swings the formula does not account for. Ecommerce brands managing dozens of SKUs often combine EOQ with demand forecasting built into a broader growth strategy rather than treating it as a one-time calculation.