EOQ Calculator
The economic order quantity is the order size where ordering cost and holding cost are at their lowest combined total, found by taking the square root of two times annual demand times cost per order, divided by the annual holding cost per unit. At the true EOQ the two costs are equal. The curve is also very flat near the optimum, so ordering the nearest practical pallet quantity is almost always the right answer.
Units sold or consumed in a year.
The cost of placing one order regardless of size — admin time, transport, inspection, receiving.
What it costs to hold one unit for a year. Roughly 20–30% of unit cost is a common rule of thumb.
Adds a reorder point to the result.
Economic order quantity
AED 0
Enter your details to see the estimate.
| Breakdown | Value |
|---|---|
| Economic order quantity | — |
| Orders per year | — |
| Days between orders | — |
| Annual ordering cost | — |
| Annual holding cost | — |
| Total annual inventory cost | — |
| Reorder point | — |
Calculated in your browser. Your figures never reach our servers, and nothing you type here creates a record.
An estimate based on the figures you entered. Model your own numbers before committing to a decision.
The concept
The trade-off EOQ solves
Two costs pull in opposite directions.
Order in large quantities and you place fewer orders, so ordering cost falls — but you hold more stock, so holding cost rises.
Order in small quantities and holding cost falls, but you order more often and ordering cost rises.
EOQ is the quantity where the two are balanced and the combined total is at its lowest. It was formulated in 1913 and it remains the standard starting point for any reorder decision.
At the true EOQ, ordering cost equals holding cost. Both rows are shown above so you can see them match — that is the signature of a correct answer.
Show the working
The EOQ formula
EOQ = √(2DS ÷ H)D is annual demand, S the cost per order, H the annual holding cost per unit.orders per year = D ÷ EOQordering cost = (D ÷ EOQ) × Sholding cost = (EOQ ÷ 2) × HAverage stock is half the order quantity.reorder point = (D ÷ 365) × lead time + safety stockWorked example. Annual demand 12,000 units, cost per order AED 400, holding cost AED 6 per unit per year. EOQ = √(2 × 12,000 × 400 ÷ 6) = √1,600,000 = 1,265 units.
That is 9.5 orders a year, roughly one every 38 days. Ordering cost 9.5 × 400 = AED 3,795. Holding cost (1,265 ÷ 2) × 6 = AED 3,795. The two match.
The question everyone gets wrong
The curve is flat — being close is good enough
The most useful thing about EOQ is rarely mentioned: the total cost curve is very flat near the optimum.
Order 20% above or below the EOQ and total cost rises by only about 2%. Order 50% off and it rises by roughly 8%.
That has a practical consequence. If EOQ says 1,265 units and your supplier ships in pallets of 1,000, order 1,000 or 2,000. Do not negotiate a broken pallet to hit a theoretical number — the pallet break will cost more than the 2% you saved.
Where EOQ genuinely stops applying:
- Volume discounts — a price break at 2,000 units can outweigh the holding cost of exceeding EOQ.
- Perishable or dated stock — shelf life caps order size regardless.
- Highly variable demand — EOQ assumes steady consumption. For lumpy or seasonal demand it is the wrong tool.
- Long or unreliable lead times — common for UAE importers, where the constraint becomes supply security rather than cost.
- Storage constraints — EOQ does not know your warehouse is full.
Treat EOQ as a starting point for the conversation with your supplier, not an instruction.
Frequently asked questions
EOQ questions
What is economic order quantity?
The order size that minimises the combined cost of ordering and holding stock. Order more and holding cost rises; order less and ordering cost rises. EOQ is the balance point.
What is the EOQ formula?
EOQ equals the square root of (2 × annual demand × cost per order) divided by the annual holding cost per unit. With demand of 12,000, an order cost of AED 400 and holding cost of AED 6, the EOQ is 1,265 units.
How do I work out my holding cost per unit?
Take 20 to 30% of unit cost as a starting estimate. It covers capital tied up, storage, insurance, obsolescence and shrinkage. Refine it later for items where the value justifies the effort.
How accurate does EOQ need to be?
Not very. The total cost curve is flat near the optimum — ordering 20% either side of the EOQ raises total cost by only about 2%. Round to the nearest pallet or supplier minimum rather than breaking one to hit a theoretical number.
What are the limitations of EOQ?
It assumes steady demand, a fixed order cost and no volume discounts. It stops being the right tool for perishable stock, lumpy or seasonal demand, long and unreliable lead times, or when the warehouse is simply full.
What is a reorder point and how is it different?
EOQ answers how much to order; the reorder point answers when. It is daily demand multiplied by lead time, plus safety stock. The two work together and neither replaces the other.
Does EOQ work with supplier volume discounts?
Not directly. Where a price break applies, compare the total cost including the discount at each break quantity against the EOQ total. The discount often outweighs the extra holding cost.