Economic Order Quantity (Wilson EOQ)
The order size that minimizes ordering plus holding cost.
Example
You enter
- Annual demand (units/yr) 12000
- Fixed cost per order ($) 50
- Annual holding cost per unit ($/unit/yr) 3
You get
- Economic order quantity 632 units per order
- Orders per year 18.97
- Total annual cost at EOQ 1897
Checked against published worked examples from: LibreTexts (Faramarzi and Drane).
Details, formula, and sources
ScopeWhich the backward-looking inventory-turnover ratio never sizes: EOQ = sqrt(2 D S / H), balancing the fixed per-order cost (setup, freight, receiving) against the annual holding cost (capital, storage, spoilage). 12,000 units/yr at $50 per order and $3/unit/yr to hold -> 632 units per order (19 orders/yr, every 19 days) at $1,897/yr total. The total-cost curve is FLAT near the minimum, so rounding to a case or pallet quantity barely raises cost -- but hand-to-mouth or a full-truckload discount does. Steady demand, no quantity discounts. A planning aid; the demand, lead time, and supplier terms govern.
Formula or tableEOQ = sqrt(2 x D x S / H); orders_per_year = D / EOQ; cycle_days = 365 / orders_per_year; total_annual = sqrt(2 x D x S x H).
Source and editionThe Wilson economic order quantity (EOQ) inventory model, by name; the actual demand, lead time, and supplier terms govern.
Free accessThe Wilson EOQ formula is a standard published inventory-management result; the annual demand, order cost, and holding cost come from the business's records.
What governsEstimate. AHJ and licensed professional govern.
API field namesannual_demand, order_cost, holding_cost, eoq, orders_per_year, total_annual
- Balances two costs EOQ minimizes fixed ordering cost plus holding cost; the two are equal at the EOQWilson EOQ model
- Flat near minimum the total-cost curve is flat near the EOQ, so rounding to a case quantity barely hurtsWilson EOQ model
- No discounts assumes steady demand and no quantity discounts; a discount tier needs a separate comparisonscope of this tile