Every time you reorder inventory you face a trade-off: order a lot and you pay to store it; order a little and you pay to place orders again and again. The Economic Order Quantity (EOQ) is the order size that minimizes the sum of those two costs. This calculator runs the classic Wilson EOQ formula, then adds the practical numbers you actually need to act on it — orders per year, cycle time, total cost, and your reorder point.
How EOQ works
Total annual inventory cost has two moving parts. Ordering cost is the cost per order (S) times how often you order (D ÷ Q), so it falls as your order quantity Q rises. Holding cost is the cost to carry a unit for a year (H) times your average inventory (Q ÷ 2), so it rises as Q rises. Add them and you get a U-shaped curve. The bottom of that U — where ordering cost and holding cost are exactly equal — is the EOQ: √(2 × D × S / H).
Because the curve is flat near the bottom, you don't have to hit the EOQ exactly. Rounding 632.46 units up to 650 or down to 600 changes total cost by only a few dollars. That's why the calculator rounds the EOQ to a whole number and tells you the cost is 'nearly flat near the optimum.'
The inputs and what moves the result
Annual demand (D) scales the answer with a square root, so quadrupling demand only doubles the optimal order size. Ordering cost (S) pushes the EOQ up — if placing an order is expensive, order more at once and less often. Holding cost (H) pushes it down — if storage is expensive, order small and often. Holding cost is the input people most often get wrong: it's not just rent, it's also the capital tied up in stock, insurance, shrinkage, and obsolescence, commonly totalling 20–30% of a unit's value per year.
Lead time and safety stock don't affect the EOQ itself — they set your reorder point, the stock level that triggers the next order. Order the EOQ when on-hand inventory falls to (daily demand × lead time) + safety stock, and the delivery should land just as you draw down to your buffer.
When EOQ breaks down
EOQ is a model, and its assumptions are strong: constant, known demand; a fixed cost per order; a constant holding cost; instantaneous replenishment of each batch; and no quantity discounts. Real supply chains violate these regularly. If your supplier offers volume discounts, the cheapest order size may be a price-break quantity above the EOQ — use a quantity-discount model instead. If demand is highly seasonal or spiky, the constant-demand assumption fails and you'll want a forecasting or newsvendor approach. If production and consumption happen at the same time, the Economic Production Quantity (EPQ) variant fits better.
Treat the EOQ as a strong default and a sanity check, not a hard rule. It tells you the right order of magnitude for your order size and exposes the trade-off between ordering and holding cost — which is usually the most valuable insight, even when you round to a convenient case-pack or pallet quantity.