Free EOQ Calculator

What is an EOQ Calculator?

An EOQ calculator (Economic Order Quantity calculator) is a free tool that determines the optimal order quantity to minimise your total inventory costs. It balances two competing costs: the cost of placing orders and the cost of holding inventory. By finding this sweet spot, you can reduce both stockouts and overstock situations while keeping your cash flow healthy. For multichannel sellers managing inventory across Shopee, Lazada, Amazon, and other platforms, understanding EOQ is essential for efficient inventory management.

How to Calculate EOQ (Economic Order Quantity Formula)

The EOQ formula is: EOQ = √(2DS / H) where:

• D = Annual demand (total units sold per year)
• S = Order cost (fixed cost per order, including shipping, admin, and processing)
• H = Holding cost (cost to store one unit for one year, including warehousing, insurance, depreciation)

For example, if you sell 10,000 units annually (D), each order costs $50 (S), and holding each unit costs $5 per year (H), your EOQ = √(2 × 10,000 × 50 / 5) = √200,000 = 447 units. This means you should order 447 units at a time to minimise total costs.

What is Holding Cost in EOQ?

Holding cost (also called carrying cost) is the total expense of storing unsold inventory for a year. This includes warehouse rent, utilities, insurance, depreciation, opportunity cost of capital, and inventory shrinkage. For ecommerce sellers, typical holding costs range from 20-30% of the item's value per year. If a product costs $25 and your holding cost rate is 20%, your annual holding cost per unit is $5. Accurately calculating your holding cost is crucial — underestimating it leads to overstocking, while overestimating causes frequent stockouts. Learn more about lead time and how it affects your reorder decisions.

What is Order Cost in EOQ?

Order cost (also called setup cost) is the fixed expense incurred each time you place an order, regardless of order size. This includes supplier processing fees, shipping costs, customs and duties (for cross-border orders), quality inspection time, and administrative overhead. For marketplace sellers sourcing from overseas suppliers, order costs can be significant — $50 to $200+ per order is common. Track these costs carefully to get accurate EOQ results. Our lead time calculator can help you plan order timing alongside quantity.

What Are the Limitations of EOQ?

EOQ makes several simplifying assumptions that may not hold in real-world ecommerce:

• Constant demand — EOQ assumes demand is steady, but most products have seasonal peaks (e.g., 11.11, Black Friday, Christmas)
• Fixed costs — Order and holding costs can fluctuate with supplier changes, currency rates, or warehouse contracts
• Instant replenishment — EOQ doesn't account for lead time; you need to order before you run out
• No bulk discounts — Suppliers often offer volume discounts that change the optimal order quantity

Use EOQ as a starting point, then adjust based on your actual business patterns. For products with variable demand, consider using safety stock calculations alongside EOQ.

How Does EOQ Help Ecommerce Sellers?

EOQ helps multichannel sellers make smarter inventory decisions in several ways:

• Reduce overstocking — Stop tying up cash in excess inventory that sits in your warehouse
• Prevent stockouts — Order frequently enough to meet demand without running dry
• Optimise cash flow — Balance inventory investment with operational needs
• Lower total costs — The EOQ point minimises the combined cost of ordering and holding
• Simplify planning — Set a consistent order quantity for stable SKUs

For sellers using platforms like Shopee, Lazada, and Amazon, EOQ works best when combined with real-time inventory sync. When you know exactly how much you have across all channels, you can apply EOQ calculations with confidence. Learn more about multichannel inventory management to see how automation can help.

Frequently Asked Questions

What is a good EOQ?

There's no universal "good" EOQ — it depends entirely on your specific demand, order costs, and holding costs. The optimal EOQ minimises your total inventory costs for each product. However, you should sanity-check your result: if your EOQ suggests ordering a year's supply at once, your holding costs may be underestimated. If it suggests ordering daily, your order costs may be too low.

How often should I recalculate EOQ?

Recalculate EOQ quarterly or whenever your costs change significantly. Major events that trigger a recalculation include: changing suppliers, moving warehouses, seasonal demand shifts, or significant changes in shipping costs. For fast-moving products with variable demand, consider dynamic reorder point calculations instead.

Can I use EOQ for all my products?

EOQ works best for products with stable, predictable demand. It's less useful for: new product launches (no demand history), seasonal items (highly variable demand), perishable goods (shelf life constraints), or products approaching end-of-life. For these cases, use judgment alongside the formula.

What's the relationship between EOQ and reorder point?

EOQ tells you how much to order, while reorder point tells you when to order. They work together: when inventory drops to your reorder point, you place an order for your EOQ quantity. The reorder point accounts for lead time and safety stock, while EOQ optimises the order size. Use our lead time calculator to determine your reorder point.