Economic Order Quantity (EOQ) Calculator
Economic Order Quantity (EOQ) answers a question every inventory manager faces: how many units should I order each time I restock? Order a huge batch and you place fewer orders, saving on processing and delivery — but the goods sit in the warehouse, tying up cash and racking up holding costs. Order tiny batches and your warehouse stays lean, yet you reorder constantly and the per-order costs pile up. EOQ is the sweet spot between those two opposing costs: the order size that makes your total annual inventory cost as low as it can go.
The Wilson formula is compact: EOQ = the square root of (2 × D × S / H), where D is annual demand, S is the cost of placing one order, and H is the cost of holding one unit for a year. For a business in Vietnam selling 10.000 units a year, where each order costs 500.000 VND to place and holding one unit for a year costs 20.000 VND, the EOQ works out to about 707 units per order. At that size you place about 14.1 orders a year, and your total inventory cost is just 14.142.136 VND a year — lower than ordering either too little or too much.
The calculator above lets you enter annual demand, the ordering cost and the per-unit holding cost, then instantly returns the EOQ, the number of orders per year and the optimal total cost, with a U-shaped chart showing the minimum landing exactly at the EOQ. One caveat: the classic EOQ model assumes steady, known demand, constant prices and instant replenishment. Real businesses in Vietnam face seasonal peaks (Tết, holidays), supplier lead times and volume discounts — so treat the EOQ as a starting point to refine, not a fixed rule.
How the calculator finds the EOQ
The two-cost trade-off
Total annual inventory cost has two parts that pull in opposite directions as the order quantity (Q) changes:
Total cost = ordering cost + holding cost = (D / Q) × S + (Q / 2) × H
| Symbol | Meaning |
|---|---|
| D | Annual demand (10.000 units) |
| S | Cost to place one order (500.000 VND) |
| H | Cost to hold one unit for a year (20.000 VND) |
| Q | Order quantity (the variable to optimise) |
| EOQ | The Q that minimises total cost |
- Large Q: the number of orders D/Q falls, cutting ordering cost, but average inventory Q/2 rises, pushing holding cost up.
- Small Q: the reverse — a leaner warehouse but many more orders.
Why the EOQ is the minimum
Total cost bottoms out exactly when ordering cost equals holding cost. Solving that condition gives the Wilson formula:
EOQ = √(2 × D × S / H)
Plugging in the numbers: EOQ = √(2 × 10.000 × 500.000 / 20.000) = 707 units. At this point the ordering cost (7.071.068 VND) exactly equals the holding cost (7.071.068 VND) — the classic signal that you are sitting at the bottom of the cost curve.
Orders per year and total cost
- Orders per year = D / EOQ = 10.000 / 707 ≈ 14.1 orders a year.
- Total inventory cost = (D/EOQ) × S + (EOQ/2) × H = 14.142.136 VND a year.
What the model leaves out
EOQ assumes steady, known demand, constant purchase prices and holding costs, no volume discounts, and instant replenishment (no lead time or safety stock). In practice you add a reorder point and safety stock for seasonal peaks. So read the EOQ as the theoretical optimum, then adjust it for your supplier terms and cash flow.
Worked example: a warehouse selling 10.000 units a year
Illustrative assumptions: steady demand of 10.000 units a year, 500.000 VND to place each order, 20.000 VND to hold one unit for a year, instant replenishment.
EOQ = √(2 × 10.000 × 500.000 / 20.000) = 707 units per order.
The table compares three order sizes: too small, the EOQ, and too large.
| Order quantity | Orders/year | Ordering cost | Holding cost | Total annual cost |
|---|---|---|---|---|
| 500 (too small) | 20 | 10.000.000 | 5.000.000 | 15.000.000 |
| 707 (EOQ) | 14.1 | 7.071.068 | 7.071.068 | 14.142.136 |
| 1.500 (too large) | 6.7 | 3.333.333 | 15.000.000 | 18.333.333 |
Three things stand out.
- At the EOQ, the two costs are equal. Ordering cost of 7.071.068 VND exactly matches holding cost of 7.071.068 VND — that equality is the bottom of the U-shaped curve.
- Drifting away from the EOQ costs real money. Ordering only 500 units at a time pushes total cost to 15.000.000 VND — about 857.864 VND a year more than the EOQ — just because you have to place 20 orders. Ordering too much (1.500) instead inflates holding cost.
- Translate it into a schedule you can run. An EOQ of 707 units means 14.1 orders a year — roughly one order every 26 days — a concrete cadence to hand your purchasing team.
Enter your own warehouse figures to get a tailored EOQ, then weigh it against any volume discount your supplier offers. FiMo also has inventory turnover and break-even calculators if you want a wider view of your stock economics.
Frequently asked questions
What is the Economic Order Quantity (EOQ)?
Economic Order Quantity (EOQ) is the number of units to order each time you restock so that your total annual inventory cost is as low as possible. It balances ordering cost (more orders cost more) against holding cost (more stock on hand costs more). Example: annual demand of 10.000 units, a 500.000 VND ordering cost and a 20.000 VND holding cost per unit give an EOQ of about 707 units per order.
What is the EOQ formula?
The Wilson formula is EOQ = √(2 × D × S / H), where D is annual demand, S is the cost of placing one order, and H is the cost of holding one unit for a year. Plugging in the example: EOQ = √(2 × 10.000 × 500.000 / 20.000) = 707 units. At that quantity the ordering cost (7.071.068 VND) exactly equals the holding cost (7.071.068 VND).
How many orders should I place per year?
Orders per year = annual demand divided by the EOQ. In the example: 10.000 / 707 ≈ 14.1 orders a year, or roughly one order every 26 days. Placing fewer, larger orders cuts ordering cost but raises holding cost; placing more, smaller orders does the opposite. The EOQ is the order size where those two forces balance and total cost is minimised.
What goes into ordering cost and holding cost?
Ordering cost (S) is what you incur each time you place an order: order processing, delivery, inspection and supplier paperwork — it does not depend on how many units are in the order. Holding cost (H) is the cost of keeping one unit in stock for a year: warehouse rent, handling, spoilage, insurance and the opportunity cost of capital tied up in inventory. In the example, S = 500.000 VND per order and H = 20.000 VND per unit per year.
What is the total inventory cost at the EOQ?
Total annual inventory cost = (D/EOQ) × S + (EOQ/2) × H. For the example of 10.000 units a year at an EOQ of 707 units, total cost ≈ 14.142.136 VND a year, split as 7.071.068 VND of ordering cost and 7.071.068 VND of holding cost. Order only 500 units at a time and total cost climbs to 15.000.000 VND — about 857.864 VND a year more.
What are the limitations of the EOQ model?
EOQ assumes steady, known demand, constant prices and holding costs, no volume discounts, and instant replenishment with no lead time. Real businesses face seasonal demand swings (in Vietnam, Tết and holidays), supplier lead times and bulk discounts. So treat the EOQ as a starting point: add safety stock, set a reorder point based on lead time, and compare the EOQ against any quantity discount before settling on a real order size.