Economic Order Quantity Calculator
The Economic Order Quantity (EOQ) calculator helps determine the optimal order size that minimizes the total cost of inventory — including ordering and holding costs. It's a vital tool for inventory management, logistics, and supply chain optimization.
EOQ (Optimal Order Size) Calculator
Economic Order Quantity Formula
Where:
- $$D$$ = Annual Demand
- $$S$$ = Ordering Cost per Order
- $$H$$ = Holding Cost per Unit per Year
Explanation:
EOQ minimizes the total cost of inventory by finding the perfect balance between ordering in bulk and holding inventory. It assumes constant demand and lead time.
EOQ is widely used in operations, retail, and manufacturing to reduce storage costs and improve ordering efficiency. By using EOQ, businesses avoid overstocking and understocking while optimizing cash flow and warehouse space.
Example Variables:
- Annual Demand (D): 10,000 units
- Ordering Cost (S): $50 per order
- Holding Cost (H): $2 per unit per year
- EOQ = √((2 × 10,000 × 50) / 2) = √500,000 = 707 units
Use Cases:
- Supply chain and procurement planning
- Inventory control systems
- Cost reduction strategies