Economic order quantity calculator
This economic order quantity calculator finds the order size at which ordering and holding costs together are lowest: enter annual demand, cost per order and holding cost, and get the reorder point and safety stock too.
Source: Wikipedia – Economic order quantity (Formel Q* = √(2DS/H), Annahmen). Updated: .
How it is calculated
With 12,000 units of annual demand, 50 per order and 2.40 holding cost per unit and year, the economic order quantity is about 707 units; with a seven-day lead time the reorder point is around 230 units. The calculator shows both.
How it is calculated
The Harris formula is Q = √(2 × annual demand × order cost ÷ holding cost per unit). Holding cost per unit is unit cost times the holding cost rate. Large orders save ordering cost but tie up capital and space; small orders do the opposite. At the minimum of total cost both items are equal.
Reorder point and safety stock
The reorder point tells you at what stock level to reorder: daily demand times lead time plus safety stock. Safety stock buffers demand swings: a factor from the service level times the variation times the square root of the lead time.
Limits of the model
The model suits steady demand without quantity discounts. With price breaks, work out each tier separately.
More tools: inventory turnover, the pallet calculator and break-even.
Frequently asked questions
How do you calculate the economic order quantity?
With Q = √(2 × annual demand × order cost ÷ holding cost per unit). For 12,000 units, 50 and 2.40 that gives about 707 units.
What counts as holding cost?
Capital tied up, storage space, insurance, shrinkage and handling. 15 to 25 % of unit cost per year is common; the calculator uses 20 % as an example.
How do you calculate the reorder point?
Daily demand times lead time plus safety stock. At 33 units a day and a seven-day lead time that is 230 units.
How big should safety stock be?
It depends on demand variation and the service level you want: z factor (95 % = 1.64) times daily standard deviation times the square root of lead time.
When does the formula not apply?
With strongly varying demand, quantity discounts or minimum orders. Then it is a guide to compare with your actual terms.
Sources and legal basis
- Wikipedia – Economic order quantity (Formel Q* = √(2DS/H), Annahmen)
- Wikipedia – Safety stock (Sicherheitsbestand z · σ · √L)
- Wikipedia – Reorder point (Bestellpunkt)
As of: · Editorial policy
Related tools
- Inventory Turnover CalculatorInventory turnover calculator: get your turnover ratio, days in inventory, days of supply and carrying-cost rate from cost of goods sold and stock levels.
- Cost of Goods Sold CalculatorCost of goods sold calculator: COGS from beginning inventory, purchases and ending inventory, plus COGS percentage, gross profit and markup, or a target price.
- Pallet calculator: boxes per palletPallet calculator: work out boxes per pallet, layers, height and weight for euro, industrial and US pallets, plus pallets needed and loading metres. Free.
- Break-even calculatorBreak-even point calculator for small businesses: units and sales revenue to break even from fixed costs, price and variable cost, plus a target profit.
- Margin calculatorMargin calculator: enter cost or price plus margin, markup or profit and get the rest – with totals by quantity and a margin table for volume price tiers.
- Volumetric weight calculatorVolumetric weight calculator: enter length, width, height and divisor to get the chargeable weight for parcels or air freight and compare it with actual weight.
- Freight Class Calculator (density-based)Freight class calculator: enter the dimensions and weight of a pallet or crate to get its density in lb/ft³ and the LTL freight class on the 13-step NMFC scale.
- Price per sheet calculatorCompare toilet paper by price per sheet and per 100 sheets, ply-adjusted. Also for paper towels, laundry detergent per load, diapers and pods. Free.
- CBM calculatorCBM calculator for shipping: enter length, width and height in cm, mm, m, inches or feet plus the number of cartons and get cubic meters and cubic feet.