How precise does the holding cost need to be?

Not very. The cost curve is flat near the optimum, so an order quantity twenty percent off the EOQ costs about two percent more. Getting the order of magnitude right is what matters.

What if my supplier has a minimum order?

Then the minimum governs where it is above the EOQ, and the page shows the cost of that constraint rather than an optimum you cannot order.

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Economic Order Quantity Calculator

The order quantity that minimises ordering plus holding cost, and how much it saves against what you order now. The cost curve is remarkably flat near the optimum, so being twenty percent off the EOQ costs about two percent, which is worth knowing before anyone argues about the inputs.

Also called: economic order quantity, optimal order size calculator.

Economic order quantity

1,225

1,225 units an order, which is 19.6 orders a year at a total cost of ₹97,980. Ordering 4000 at a time costs 175000 a year against 97979.59 at the EOQ, so moving to it saves about 77020.41. At 1470 units, twenty percent above the optimum, the total cost rises only 1.7%. The curve is flat around the minimum, so round to a case or pallet quantity rather than arguing about the holding rate.

Orders a year

19.6

Ordering plus holding cost

₹97,980

Ordering cost a year

₹48,990

Holding cost a year

₹48,990

Days between orders

18.6

Cost at your current quantity

₹1,75,000

Annual saving against your current quantity

₹77,020

Against what you order now

Ordering 4000 at a time costs 175000 a year against 97979.59 at the EOQ, so moving to it saves about 77020.41.

On precision

At 1470 units, twenty percent above the optimum, the total cost rises only 1.7%. The curve is flat around the minimum, so round to a case or pallet quantity rather than arguing about the holding rate.

How this is calculated

Total cost by order quantity

Hover or drag for values

Total cost

Cost at different order sizes

Order quantity	Orders a year	Ordering cost	Holding cost	Total	Above optimum
612	39.2	₹97,980	₹24,495	₹1,22,474	25%
919	26.1	₹65,320	₹36,742	₹1,02,062	4.2%
1,225	19.6	₹48,990	₹48,990	₹97,980	0%
1,531	15.7	₹39,192	₹61,237	₹1,00,429	2.5%
1,837	13.1	₹32,660	₹73,485	₹1,06,145	8.3%
2,449	9.8	₹24,495	₹97,980	₹1,22,474	25%

Method and background

How this is calculated

Ordering in large batches means few orders and a large average stock; ordering in small ones reverses both. EOQ is where the two costs cross. The square root has two consequences worth understanding. The answer is insensitive to its inputs, so doubling the ordering cost raises the quantity by only about forty percent, and the total cost curve is flat around the minimum, so a quantity twenty percent away from the EOQ costs roughly two percent more than the optimum. That flatness is the practical result: round the EOQ to a case or pallet quantity without guilt, and do not spend a week estimating the holding rate to two decimals.

the square root is why the answer is insensitive: doubling the order cost raises the quantity by only forty percent

D: Annual demand
S: Cost of placing an order
H: Holding cost a unit a year

Worked examples

Each of these is asserted on every build. If a change to the engine ever moved one of these answers, the build would fail before the page could print it.

24,000 a year at a 2,500 order cost

Annual demand: 24,000
Cost of placing an order: ₹2,500
Cost a unit: ₹400
Annual holding cost: 20%
What you order now: 4,000
Supplier minimum: 0

Economic order quantity1,225

sqrt(2 x 24000 x 2500 / 80)

Open this example

a supplier minimum above the optimum

Annual demand: 24,000
Cost of placing an order: ₹2,500
Cost a unit: ₹400
Annual holding cost: 20%
What you order now: 0
Supplier minimum: 3,000

Economic order quantity3,000

boundary: the constraint governs and costs 43% more than the free optimum

Open this example

Method and limits

What it assumes

Steady demand and a constant lead time, which is the classical model and rarely the real one.
No quantity discounts, which change the answer materially when they exist.

What it deliberately does not model

Quantity discounts, perishability and storage limits all override the EOQ.
Demand that is seasonal or lumpy breaks the constant-rate assumption the model rests on.

Formula version 1.0.0 · definition 1.0.0 · India · Report a problem with this calculator

Frequently asked questions

How precise does the holding cost need to be?: Not very. The cost curve is flat near the optimum, so an order quantity twenty percent off the EOQ costs about two percent more. Getting the order of magnitude right is what matters.
What if my supplier has a minimum order?: Then the minimum governs where it is above the EOQ, and the page shows the cost of that constraint rather than an optimum you cannot order.