Enter annual demand, the cost of placing one order and the cost of holding one unit for a year to get the economic order quantity, how often to order and what it costs, with a ±20% check.
The calculator uses the classic Wilson formula for economic order quantity:
EOQ = √(2 × D × S ÷ H)
From EOQ the rest follows. Orders per year = D ÷ EOQ. Days between orders = working days per year ÷ orders per year. Annual ordering cost = orders per year × S. Annual holding cost = (EOQ ÷ 2) × H, because average stock is half the order quantity when stock falls steadily and is replenished all at once. At EOQ the two costs are equal, and their total is the lowest the model allows. The last two rows recompute the total at 20% below and 20% above EOQ, so you can see how much a rounded or convenient quantity really costs.
An illustrative item sells 2,400 units a year. Placing and receiving one order costs ₹300, and holding one unit for a year costs ₹36. These are made-up numbers chosen to keep the arithmetic simple.
| Step | Working | Result |
|---|---|---|
| EOQ | √(2 × 2,400 × 300 ÷ 36) = √40,000 | 200 units |
| Orders per year | 2,400 ÷ 200 | 12 |
| Days between orders | 300 working days ÷ 12 | 25 days |
| Annual ordering cost | 12 × ₹300 | ₹3,600 |
| Annual holding cost | (200 ÷ 2) × ₹36 | ₹3,600 |
| Total at EOQ | ₹3,600 + ₹3,600 | ₹7,200 |
| At 160 units (−20%) | 15 × ₹300 + 80 × ₹36 | ₹7,380 (+2.5%) |
| At 240 units (+20%) | 10 × ₹300 + 120 × ₹36 | ₹7,320 (+1.7%) |
Notice how flat the cost curve is near EOQ. Ordering 20% more or less than the formula suggests adds only a few per cent to the total, so rounding to a full case, pallet or truck is usually fine. Ordering half or double the EOQ costs noticeably more.
EOQ answers one question: how many units per order keeps ordering and holding cost lowest. It does not say when to place the order. Timing depends on stock on hand, stock in transit, daily use and the supplier’s real lead time. For that, use the raw material order-by date calculator, which works out days of cover and how soon to order.
An order quantity is only as good as the stock and receipt records behind it. For distribution warehouses fulfilling many small orders, a WMS for small-order warehouses logs every receipt with vehicle, gate and challan, suggests the zone and rack for putaway and keeps every receipt, move and dispatch on one record, which gives you real movement history to estimate demand from. See how putaway decisions are made in warehouse putaway rules.
EOQ = √(2DS ÷ H), where D is annual demand in units, S is the cost of placing one order and H is the cost of holding one unit for a year. It is the order quantity at which annual ordering cost and annual holding cost are equal and their total is lowest.
Add up a year’s cost of keeping stock: interest or opportunity cost on the money tied up, storage space, handling, insurance, damage and expiry. Divide by the average units held, or express it as a percentage of unit cost and multiply by the unit cost.
EOQ is how much to order each time. The reorder point is the stock level at which you place the order, based on daily use, lead time and a safety margin. You normally need both.
It assumes steady demand, a fixed price with no quantity discounts, known ordering and holding costs, and a whole order arriving at once. When demand is seasonal, discounts apply or shelf life is short, adjust the quantity or compare total cost directly.
See it on your own data. Warehouse OS — Purchase list to packed orders. Book a 30-minute working session with an engineer.
