Perimattic
Supply chain logistics

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Economic Order Quantity Calculator

Enter annual demand, ordering cost, and holding cost to find the order size that minimizes total inventory cost. See the annual cost breakdown.

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What is the Economic Order Quantity (EOQ) formula?

The Economic Order Quantity (EOQ) is calculated as √(2DS/H), where D is annual demand in units, S is the fixed cost per order (purchasing, receiving, inspection), and H is the annual holding cost per unit (storage, insurance, obsolescence, capital cost). EOQ finds the order size that minimizes the sum of ordering costs and holding costs. Demand OS uses EOQ as a starting point and adjusts dynamically for demand variability, quantity discounts, and capacity constraints.

Calculator

Enter ordering and holding cost data

Formula used

EOQ = √(2DS / H)
Where D is annual demand, S is the fixed cost per order, and H is the annual holding cost per unit. EOQ minimizes the sum of ordering and holding costs.

Results

Enter demand and cost data, then click “Calculate EOQ”.

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Frequently Asked Questions

EOQ and order sizing, answered

What costs does EOQ balance?+
EOQ balances two opposing costs: ordering costs (which decrease with larger, less frequent orders) and holding costs (which increase with larger orders because more inventory sits in the warehouse). The optimal order quantity is the point where the total of these two costs is minimized. Ordering costs include purchase order processing, receiving, and inspection. Holding costs include storage, insurance, obsolescence, and the opportunity cost of capital tied up in inventory.
What are the limitations of the basic EOQ model?+
The classic EOQ formula assumes constant demand rate, fixed ordering and holding costs, no quantity discounts, instantaneous replenishment, and no stockouts. In practice, demand varies, suppliers offer volume discounts, lead times are non-zero, and capacity constraints exist. EOQ is a useful starting point, but real-world replenishment planning needs to adjust for these factors — which is what Demand OS does automatically.
How do I estimate holding cost per unit?+
Annual holding cost per unit is typically 20–30% of the item's unit cost. This includes: capital cost (8–15% — the return you could earn on the money tied up in inventory), storage cost (2–5% — warehouse space, utilities), insurance (1–3%), and obsolescence/shrinkage (2–5%). If you don't have a precise figure, start with 25% of unit cost as a reasonable estimate.
How does Demand OS go beyond basic EOQ?+
Demand OS starts from EOQ logic but adjusts order quantities dynamically based on forecasted demand shifts, supplier quantity discount schedules, warehouse capacity constraints, and cash flow targets. The system recalculates optimal order sizes as demand forecasts update, rather than using a static annual demand figure. This produces order recommendations that respond to real conditions instead of assuming a steady-state world.
Should I use EOQ for every SKU?+
EOQ works best for SKUs with relatively stable, continuous demand — typically A and B-class items. For C-class or intermittent-demand items, EOQ may suggest impractically small or large orders. For these SKUs, min/max policies or periodic review systems are often more practical. Demand OS automatically selects the right replenishment policy per SKU based on demand pattern classification.

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Demand OS adjusts order quantities in real time based on demand shifts, supplier discounts, and capacity constraints — not a static annual average.

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