⚖️ Economic Order Quantity

Order small and often, and you drown in ordering costs. Order huge and rarely, and you pay to warehouse a mountain. EOQ is the order size where those two costs balance. Enter your own order quantity 📍 and watch both the cost curves and the inventory rhythm react.

Parameters

Fixed cost of placing one order (admin, freight…)
% of unit value per year — set to 0 to see why "free" storage means one giant order
Units bought each time you place an order (the batch size) — change it to compare your 📍 against the optimum ★

Cost curves

EOQ = √( 2 × D × S ÷ H ) D = annual demand · S = cost per order ·  H = holding (carrying) cost per unit per year = unit cost × holding rate
Ordering cost Holding (carrying) cost Total cost 📍 Your choice ★ EOQ optimum
EOQ (optimum)
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Your total cost / yr
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Optimal cost / yr
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Overspend
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Orders / yr
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Inventory rhythm at your order size

"Order quantity" (Q) is the batch size: the number of units you buy each time you place a replenishment order. With annual demand of 12,000 and Q = 1,000, you order 12 times a year; stock jumps to 1,000 on delivery, drains to zero, and averages Q/2 — which is exactly the sawtooth below. Small Q = many orders, little stock. Big Q = few orders, lots of stock.

Notice: the total-cost curve is flat near the optimum — being 20% off EOQ barely costs you anything. That's why in practice EOQ mostly gets rounded to pallets and truckloads (see Safety Stock for MOQ & rounding) without losing much.