Method and assumptions
Classic EOQ assumes stable demand, immediate replenishment and no quantity discounts or stockouts. Use it as a baseline before adding operational constraints.
EOQ = square root of (2 × annual demand × cost per order / annual holding cost per unit).
Common questions
Does EOQ include safety stock?
No. EOQ chooses an order quantity; safety stock addresses demand and lead-time uncertainty.
What is holding cost per unit?
It can include capital, storage, insurance, shrinkage and obsolescence expected for one unit over a year.
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