EOQ (Economic Order Quantity)
Also known as: economic order quantity
The order size that minimises the combined cost of ordering and holding inventory.
EOQ (Economic Order Quantity) is the order quantity that minimises the total cost of inventory, balancing two opposing costs: ordering cost (which favours large, infrequent orders) and holding cost (which favours small, frequent ones).
The classic formula uses annual demand, the cost per order, and the annual holding cost per unit. The result is the sweet spot where the total of those costs is lowest.
EOQ is a useful starting point rather than a rigid rule; real ordering decisions also weigh supplier minimums, bulk discounts, shelf life, and cash flow.
Put it into practice
Related terms
Run it in one system
VNDLY tracks stock, orders, and suppliers together so terms like this stop being theory and start being automatic.