# EOQ Calculator: Find Your Economic Order Quantity

> Source: https://netray.co/tools/eoq-calculator
> Publisher: Netray (netray.co), AI and integration engineering for ERP and manufacturing systems.
> Section: Free Tools

## Short answer

Compute the order quantity that minimizes combined ordering and holding cost, with orders per year and total annual cost at the optimum.

## Category

manufacturing

## Tool

**Kind:** calculator

**Inputs:**

#### Annual demand

**Key:** annual_demand_units

**Type:** number

**Default:** 12000

**Min:** 10

**Max:** 10000000

**Step:** 100

**Unit:** units

**Help:** Expected annual usage of this item. Use demonstrated 12-month usage, not gross forecast.

#### Cost per order

**Key:** cost_per_order

**Type:** number

**Default:** 150

**Min:** 1

**Max:** 10000

**Step:** 5

**Unit:** $

**Help:** Fixed cost of placing and receiving one order: PO processing, receiving, inspection, invoice handling. For manufactured items, use setup cost.

#### Unit cost

**Key:** unit_cost

**Type:** number

**Default:** 25

**Min:** 0.01

**Max:** 1000000

**Step:** 0.5

**Unit:** $

**Help:** Purchase price or standard cost per unit.

#### Annual carrying cost rate

**Key:** carrying_rate_pct

**Type:** slider

**Default:** 20

**Min:** 5

**Max:** 40

**Step:** 1

**Unit:** %

**Help:** All-in holding rate: capital, storage, insurance, obsolescence. Discrete manufacturers typically run 18-30%. Use our carrying cost calculator to build yours.

**Outputs:**

#### Annual holding cost per unit

**Key:** holding_cost_per_unit

**Expr:** unit_cost * carrying_rate_pct / 100

**Format:** currency

**Description:** What it costs to keep one unit in stock for a year.

#### Economic order quantity

**Key:** eoq_units

**Expr:** round(sqrt(2 * annual_demand_units * cost_per_order / max(holding_cost_per_unit, 0.01)))

**Format:** number

**Description:** The lot size that minimizes combined ordering and holding cost.

**Primary:** true

#### Orders per year at EOQ

**Key:** orders_per_year

**Expr:** annual_demand_units / max(eoq_units, 1)

**Format:** number

**Description:** How often you would order at the economic quantity.

#### Total annual ordering + holding cost

**Key:** total_annual_cost

**Expr:** orders_per_year * cost_per_order + eoq_units / 2 * holding_cost_per_unit

**Format:** currency

**Description:** Combined cost at the optimum, excluding the material itself.

**Disclaimer:** Estimates only. Classic EOQ assumes steady demand and no quantity discounts, minimums, or shelf life - adjust for supplier constraints before loading into your ERP.

## Content

**Intro:** This free EOQ calculator computes the economic order quantity - the lot size that minimizes the sum of ordering and holding costs - for buyers, planners, and materials managers running MRP in discrete manufacturing. Enter annual demand, cost per order, unit cost, and your carrying rate; the tool returns the optimal quantity, resulting order frequency, and total annual cost at the optimum. At the defaults (12,000 units, $150 per order, $25 unit cost, 20% carrying rate), EOQ is 849 units ordered roughly 14 times per year. It is the fastest sanity check on lot sizes that have sat untouched in your ERP for years.

**Sections:**

#### How the EOQ formula works

**Body:** EOQ is the square root of (2 x annual demand x order cost) divided by the annual holding cost per unit. The logic is a trade-off: larger lots mean fewer orders and less ordering cost, but more average inventory and more holding cost. The two cost curves cross at the EOQ, where total cost is minimized - and at that point, annual ordering cost exactly equals annual holding cost, which you can verify in the total cost output. The curve is deliberately flat near the optimum: ordering 20% above or below EOQ raises total cost only about 2%. That flatness is useful - it means you can round to pack sizes, pallet quantities, or supplier minimums without meaningfully losing money.

#### Getting the inputs right

**Body:** EOQ is only as honest as its inputs, and several of them are chronically wrong in practice. Before trusting the output, pressure-test each input against these guidelines drawn from ERP lot-sizing audits:

**Bullets:**

- Cost per order should include PO processing, receiving, incoming inspection, and invoice handling - typically $50-$250 per line for manufacturers, higher with heavy inspection requirements.
- For manufactured items, replace order cost with setup cost (labor plus lost constraint capacity during changeover) to get an economic production quantity.
- The carrying rate should be your all-in rate (18-30% for most discrete shops), not the finance-only capital rate.
- Annual demand should be demonstrated usage; for declining or end-of-life items, EOQ overbuys and shelf-life or ECO risk dominates.

#### EOQ inside MRP: where it helps and where it hurts

**Body:** In Infor SyteLine, LN, and Baan, EOQ typically maps to a fixed order quantity or period order quantity policy. It works well for stable, independent-demand items - fasteners, consumables, C-class components - where demand is smooth enough for the steady-state assumption to hold. It misbehaves on lumpy dependent demand, where a fixed quantity either strands inventory or triggers order splitting, and on items with strict shelf life or high engineering-change exposure, where the carrying rate understates real obsolescence risk. A practical rule: apply EOQ-based policies to your B and C items to cut planner workload, and manage A items with tighter, more dynamic policies reviewed quarterly.

#### How Netray helps you fix lot sizing at scale

**Body:** Running one EOQ is easy; keeping 10,000 item policies current is the hard part. Netray audits lot sizes, order policies, and order costs across your SyteLine, LN, or Baan item master, computes economic quantities from demonstrated demand and your true carrying rate, and quantifies the inventory and ordering cost impact of every recommended change before you commit it. Our on-prem AI then re-evaluates policies continuously as demand shifts, flagging items whose lot sizes have drifted materially from economic - all inside your firewall, which keeps ITAR and export-controlled demand data where it belongs. Typical first-pass audits find 20-40% of items running economically indefensible lot sizes.

**Cta:** Have Netray run an economic lot size audit across your item master and quantify the inventory it would release.

**Faq:**

#### My supplier has a minimum order quantity above my EOQ. What now?

**Answer:** Because the total cost curve is flat near the optimum, a minimum modestly above EOQ (say up to 30-50% higher) usually costs little - compute the total cost at the MOQ and compare. If the MOQ is several multiples of EOQ, the excess holding cost becomes real money: use that figure to negotiate the minimum down, ask for scheduled releases against a blanket order, or requalify a second source.

#### Should I use EOQ for manufactured items or just purchased ones?

**Answer:** Both, with one substitution: for manufactured items, replace ordering cost with true setup cost, including the value of lost capacity on a constraint work center during changeover. That version is the economic production quantity. Be careful on constraints - if the work center is your bottleneck, setup time is far more expensive than the labor rate suggests, which pushes economic lots larger, while SMED programs that cut setup times push them smaller.

#### How often should EOQ-based lot sizes be recalculated?

**Answer:** Review A items quarterly and B/C items annually, or immediately when demand shifts more than about 25%, a supplier or price changes, or your carrying rate is rebuilt. Since EOQ scales with the square root of demand, a 50% demand increase only moves EOQ about 22% - so small drifts rarely matter, but multi-year-old lot sizes almost always do. The common failure mode is setting policies at ERP go-live and never touching them again.

## Search terms

EOQ calculator, economic order quantity formula, optimal order quantity, EOQ with carrying cost, lot sizing ERP, ordering cost vs holding cost, Wilson EOQ model

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