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How much should we order at a time?

EOQ is the order size that minimises ordering cost plus holding cost. Order too little and you pay to reorder constantly; order too much and cash sits on the shelf. The tool also shows the cash an average order ties up.

Your assumptions

Worked-example values — replace with yours

Annual demand· per year

units

Cost to place and receive one order· per order

$per order

Admin, setup and receiving cost, excluding the goods.Holding cost of one unit· per year

$per unit

Capital, storage and obsolescence to hold one unit for a year.Cost of one unit· at cost

$per unit

Economic order quantity · Estimated

707

units per order

Orders per year: 14

Cycle stock held on average: 354units

Cash tied up in cycle stock: $3,536average, at cost

Balanced. This order size balances reorder effort against carrying cost at the inputs you entered. Round to supplier pack and minimum order sizes.

Excludes safety stock — see the safety stock and reorder point tool.

This is an estimate. Check it on your own data.

EOQ assumes steady demand and known costs. The replenishment policy that holds up under real demand — by item class, with supplier minimums — is built on your own history in a workspace.

Check it on my data →

Your inputs travel with you into the request, or into the free Margin Scan. Nothing is sent to ADEXMA until you submit a form.

The formula

EOQ = √( 2 × annual demand × cost per order ÷ holding cost per unit per year )
orders per year = annual demand ÷ EOQ
cycle stock = EOQ ÷ 2 · cash tied up = cycle stock × unit cost

Worked example · the values pre-filled above

Annual demand: 10,000 units · Cost to place and receive one order: $50 per order · Holding cost of one unit: $2 per unit · Cost of one unit: $10 per unit

EOQ = √(2 × 10,000 × $50 ÷ $2) = √500,000 = 707 units.
Orders per year = 10,000 ÷ 707 = 14.1.
Average cycle stock = 707 ÷ 2 = 354 units, which at $10 a unit ties up $3,536.

Result: 707 units · 14 orders a year

What this assumes

Demand is steady and known; real demand is lumpy, so treat the answer as a starting point.
No quantity discounts, minimum order quantities or pack sizes.
Order and holding costs are constant.
It is an estimate from your own inputs. Results from different tools overlap and must never be added together into one savings figure.

Sources

Harris, F. W., “How Many Parts to Make at Once”, Factory, The Magazine of Management 10(2), 1913 — Origin of the economic order quantity.
Silver, E., Pyke, D. & Thomas, D., Inventory and Production Management in Supply Chains (CRC Press, 4th ed.) — EOQ and its sensitivity to cost errors.
ADEXMA Calculation Catalog · FRM-SC-004 · part of Margin Architecture™.

Questions people ask

What is the economic order quantity?

The order size that minimises the sum of ordering cost and holding cost. It is the square root of 2 × demand × order cost ÷ holding cost.

Is EOQ sensitive to my inputs?

Only mildly: the total cost curve is flat near the optimum, so being off by 20–30% on the order size costs little. Wrong inputs matter more than rounding.

CashSafety stock and reorder pointHow much safety stock is enough, and when should we reorder?CashInventory cash releaseHow much cash would we free up by holding fewer days of inventory?

On your own data, Chloé picks up this finding in a workspace and your advisor confirms it. See what each plan adds →