Business & Commerce
Intermediate

Economic Order Quantity (EOQ)

The order size that minimizes total inventory ordering and holding costs.

Formula

EOQ=2DSHEOQ = \sqrt{\dfrac{2DS}{H}}

Variables

EOQOptimal order quantity
DAnnual demand
SCost per order
HHolding cost per unit/yr

Example

D=10000, S=$50, H=$5: EOQ ≈ 447 units

Did You Know?

EOQ, derived in 1913, is one of the oldest operations-research formulas still used in supply chains today.

inventoryeoqoptimization