Economic Order Quantity (EOQ) Calculator 2025/26
Calculate the optimal stock order quantity to minimise total inventory costs using the Wilson EOQ formula. Enter annual demand, order cost and holding cost to find the quantity that balances ordering frequency against the cost of holding stock.
Key Inputs
- Annual demand (D) in units
- Order cost per order (S) — purchasing admin, delivery, receiving (£)
- Annual holding cost per unit (H) — typically 20-30% of unit value; includes warehouse rent, capital tied up, obsolescence, insurance (£)
- Unit purchase cost (£) — used to calculate holding cost percentage if not known
- Lead time from supplier (days) — for reorder point calculation
What You'll Get
- Economic Order Quantity (EOQ) in units: √(2DS/H)
- Number of orders per year at EOQ
- Total annual ordering cost at EOQ (£)
- Total annual holding cost at EOQ (£)
- Total annual inventory cost at EOQ (£)
- Reorder point (units) based on lead time and daily demand
Important Notes — 2025/26 Rates & Caveats
EOQ minimises the sum of ordering costs and holding costs — at the EOQ point, these two costs are equal. The formula assumes constant and known demand, constant ordering and holding costs, and no quantity discounts. Safety stock is not included in the basic EOQ calculation — add safety stock to the reorder point separately for variable demand. Holding costs typically run 20-30% of unit value annually: 15-20% capital cost (opportunity cost of money tied up in stock), plus 5-10% for storage space, insurance, obsolescence and damage. EOQ works best for steady-selling products; it is less useful for seasonal, perishable or highly lumpy demand.
Frequently Asked Questions
What is Economic Order Quantity?
The Economic Order Quantity (EOQ) is the optimal order size that minimises total inventory costs — the sum of ordering costs and holding costs. The Wilson EOQ formula is: EOQ = √(2 × D × S / H), where D is annual demand in units, S is the cost of placing one order (in £), and H is the annual holding cost per unit (in £). At the EOQ point, annual ordering cost equals annual holding cost, which is the mathematical minimum of total inventory cost.
What is a holding cost percentage?
Annual holding costs typically run 20-30% of unit value — the costs associated with keeping one unit of stock for a full year. Components include: capital cost (the opportunity cost of money tied up in inventory, typically 8-15%); warehouse space and handling (3-8% depending on storage type); obsolescence and deterioration risk (1-5%); insurance and security (0.5-1.5%). For a product worth £10, a 25% holding cost rate means H = £2.50/unit/year.
When does EOQ not apply?
EOQ assumes constant, deterministic demand and fixed costs — limitations include: seasonal demand (EOQ gives one number but optimal order quantity varies by season); quantity discounts (larger orders may reduce unit cost, making the true optimal larger than EOQ); perishable goods (holding costs increase non-linearly as goods near expiry); and supply constraints (if minimum order quantities exceed EOQ, you must order more). In these cases, more sophisticated inventory models or simulation are needed.
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