Glossary · Purchasing
What is Economic order quantity (EOQ)?
Economic order quantity is the order size that minimises the combined annual cost of placing orders and holding stock.
It assumes steady demand and a constant price. Real orders then get rounded to minimum order quantities and case packs, and adjusted for cash and shelf life.
Formula
EOQ = √( 2 × annual demand × cost per order ÷ holding cost per unit per year )
Example
12,000 units a year, $90 per order, $2.40 holding cost per unit: EOQ ≈ 949 units.
Calculate it
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