Economic Order Quantity Calculator
Calculate the order quantity that minimises combined ordering and holding cost, with the total cost curve, order frequency, cycle length and a quantity discount comparison.
Last reviewed by the Radiatus Cloud team
Quantity discount tiers (optional)
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Two costs pulling in opposite directions
Ordering in large quantities reduces the number of orders and therefore the ordering cost, but it raises average inventory and therefore the holding cost. Ordering in small quantities does the reverse. The economic order quantity is the point where the two curves cross and total cost is lowest. Wilson derived it in 1913 and it remains the base model for inventory policy because the logic is sound even where the assumptions are only approximately true.
The curve is flat near the optimum
The most useful property of the model is rarely mentioned: the total cost curve is shallow around its minimum. Ordering twenty percent away from the optimal quantity typically costs under two percent more in total. That means the exact number matters much less than being in the right region, and it makes the model robust to the estimation error in holding cost that would otherwise invalidate it. It also means a supplier's minimum order quantity or case pack size is usually worth accepting rather than fighting.
Where the assumptions break
The classic model assumes constant demand, instant replenishment, no stockouts and no quantity discounts. Real demand varies, which is what safety stock covers, and real suppliers offer price breaks, which can make a larger order genuinely cheaper despite the higher holding cost. The calculator compares the EOQ against any discount tiers you enter, since the correct answer in that case is whichever total cost is lower rather than the formula's output.
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Frequently Asked Questions
What should holding cost include?
Capital cost of the money tied up, storage space, insurance, handling, obsolescence and shrinkage. A common range is 15 to 30 percent of unit value per year. Using only warehouse rent understates it badly for high value or perishable goods.
What counts as ordering cost?
Everything that is incurred per order regardless of quantity: purchasing administration, receiving, inspection, invoice processing and any fixed freight charge. It does not include the cost of the goods themselves.
How sensitive is the answer to my estimates?
Not very, which is the model’s best feature. The total cost curve is flat near the optimum, so ordering 20 percent off the ideal quantity typically adds under 2 percent to total cost. Getting into the right region is what matters.
Does EOQ handle quantity discounts?
Not on its own. The calculator compares the EOQ total cost against each discount tier you enter, because a price break can make a larger order cheaper overall despite higher holding costs. The answer is whichever total is lowest.
Should I use EOQ with variable demand?
It still gives a reasonable order size for items with moderate variation, using average annual demand. What it does not do is protect against stockouts, which is what safety stock and a reorder point are for. Use both together.
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How to Use
Enter annual demand, cost per order and holding cost to get the optimal order quantity.
Disclaimer: This tool is provided "as is" without warranty of any kind. Results are for educational and utility purposes.
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