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Economic Order Quantity (EOQ) Calculator: Calculate economic order quantity (eoq) in Seconds

Calculate optimal order quantity. Minimize inventory costs. This tool helps you calculate, understand, and optimize this metric for your business.

By Veira Inventory Expert, Inventory Advisor at VeiraPublished June 2024Updated June 2024
Calculator
Transport, admin time and any fixed delivery charge.
Storage, spoilage, damage and the cash tied up.
Result
Order 1,095 units at a time
Annual demand12,000 units
Cost to place one orderKES 3,000
Cost to hold one unit per yearKES 60
Economic order quantity1,095 units
Orders per year11.0
Total annual cost at this quantityKES 65,727

EOQ balances two costs that pull in opposite directions: ordering often costs you in transport and admin, ordering rarely ties up cash and warehouse space. It assumes steady demand, so treat it as a starting quantity to adjust rather than a rule.

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Balancing two opposite costs

Ordering often costs money in transport, admin and time. Ordering rarely costs money in cash tied up, storage and spoilage. Economic order quantity is the size that makes the sum of those two smallest.

The formula assumes steady demand and a stable cost to order, which is rarely exactly true, so treat the result as a sensible starting quantity to adjust rather than an instruction.

Where it misleads

EOQ ignores supplier minimum order quantities, bulk discounts, shelf life and the cash you actually have. A mathematically optimal order you cannot afford is not optimal.

Use it to check whether your current ordering pattern is wildly off, not to set every order to the decimal.

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Worked examples

12,000 units a year, KES 3,000 per order, KES 60 to hold a unit
  • EOQ about 1,095 units
  • Roughly 11 orders a year
  • Adjust for supplier minimums and shelf life

Frequently asked questions

What is economic order quantity?
The order size that minimises the sum of ordering costs and holding costs. Ordering often costs transport and admin; ordering rarely ties up cash and storage. EOQ sits between them.
What counts as a holding cost?
Storage, spoilage and damage, insurance, and the cost of the cash tied up in stock that is not yet sold.
Why does EOQ sometimes give an impractical number?
Because it ignores supplier minimum order quantities, bulk discounts, shelf life and the cash you actually have. Treat it as a check on whether your current pattern is wildly off, not as an instruction.
Does EOQ work with seasonal demand?
Not well. The formula assumes steady demand. For seasonal lines, plan the peak separately and use EOQ for the steady months.

Doing this by hand every time? Veira runs the same calculation automatically on every sale, no spreadsheet required.

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