EOQ Calculator

Enter demand, ordering cost, and unit cost

Annual Demand (units)

Ordering Cost per Order (₹) Admin + delivery cost for placing one purchase order

Unit Purchase Cost (₹)

Annual Holding Cost Rate (%) Typically 15–25% of inventory value per year

Optimal Order Quantity (EOQ)

0 units

Annual Ordering Cost

₹0

Annual Holding Cost

₹0

Total Annual Inv. Cost

₹0

Orders per Year

💡 Business Impact

EOQ minimises total inventory cost by balancing ordering costs against holding costs. Ordering too frequently wastes money on processing; ordering too much wastes money on storage.

Recommended Actions

✓ Recalculate EOQ when supplier terms change

✓ Factor in bulk discounts when comparing vs EOQ

✓ Use EOQ as a starting point, adjust for practical constraints

✓ Track actual order quantities vs EOQ recommendations

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Formula & How It Works

EOQ = √(2 × Annual Demand × Ordering Cost per Order ÷ Annual Holding Cost per Unit)

Annual Holding Cost per Unit = Unit Cost × Holding Cost Rate %
Orders per Year = Annual Demand ÷ EOQ
Total Annual Cost = (Annual Demand ÷ EOQ × Ordering Cost) + (EOQ ÷ 2 × Holding Cost)

Worked Example

Scenario: Annual demand: 12,000 units, Order cost: ₹500/order, Unit cost: ₹200, Holding rate: 20%/year.

Annual Holding Cost per Unit = ₹200 × 20% = ₹40

EOQ = √(2 × 12,000 × 500 ÷ 40) = √3,00,000 = 548 units per order

Orders per year = 12,000 ÷ 548 = 22 orders/year

Total Cost = (22 × ₹500) + (274 × ₹40) = ₹11,000 + ₹10,960 = ₹21,960

When to Use This Calculator

Determine the optimal reorder quantity for fast-moving retail products
Balance ordering frequency against warehouse space constraints
Reduce total inventory cost by finding the right order size
Plan purchasing budget more accurately across product categories
Set buying guidelines for purchasing team in distribution operations

Frequently Asked Questions

What is Economic Order Quantity (EOQ)? +

EOQ is the optimal order quantity that minimizes total inventory costs — the sum of ordering cost and holding/carrying cost. Ordering too frequently increases ordering cost; ordering too much increases holding cost.

What is included in ordering cost? +

Ordering cost includes the cost of placing each order — staff time for purchase orders, delivery charges per order, administrative costs, and any minimum order processing fees.

What is included in holding cost? +

Holding cost (carrying cost) includes warehouse rent allocated to inventory, insurance, interest on capital locked in inventory, obsolescence, and deterioration. It is typically 15–25% of inventory value per year.

Does EOQ work for perishable goods? +

Standard EOQ is designed for non-perishables with stable demand. For perishables, modify the model to factor in the maximum shelf life as an upper limit on order quantity.

How often should I order at EOQ? +

Reorder Frequency = Annual Demand ÷ EOQ. For example, if annual demand is 1,200 units and EOQ is 100, you order 12 times per year — roughly once per month.