Free tool
Economic order quantity (EOQ) calculator
Find the order size that balances ordering costs against the cost of holding stock, then see how often you'd reorder.
The EOQ formula
Example: 2,200 units a year, $60 per order, $8 unit cost at 25% holding cost ($2 per unit per year). EOQ = √(2 × 2,200 × 60 ÷ 2) = 363 units, about 6 orders a year.
When EOQ is wrong for you
- Seasonal products. EOQ assumes steady demand. Order more before your peak and less after.
- Long lead times. EOQ says how much, not when. Pair it with a reorder point.
- Minimums and price breaks. If the supplier's minimum is above your EOQ, the minimum wins.
- Tight cash. Smaller, more frequent orders cost more in shipping but free up cash.
FAQ
What does EOQ mean?
Economic order quantity: the order size that minimizes the combined cost of placing orders and holding inventory.
Should a small Shopify store use EOQ?
As a sanity check, yes. In practice supplier minimums, case packs, price breaks and cash flow often matter more, so treat EOQ as a starting point and round to what your supplier sells.
What counts as holding cost?
Everything it costs to keep a unit on the shelf for a year: storage, insurance, shrinkage, and the cost of the cash tied up. 20% to 30% of unit cost per year is a common estimate.
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