Purchasing
Economic order quantity
Economic order quantity is the theoretical order size that minimizes combined ordering and inventory holding cost.
Also known as
EOQ
Direct answer
What is Economic order quantity?
Economic order quantity is the theoretical order size that minimizes combined ordering and inventory holding cost. EOQ is a useful starting point but practical planning must add MOQ, price breaks, cash limits, seasonality, and variable demand.
Formula
EOQ = √((2 × annual demand × ordering cost) ÷ holding cost per unit)
Practical example
Small frequent orders reduce inventory but increase process and transport cost. EOQ finds the mathematical balance.
What teams should remember
Economic order quantity is the theoretical order size that minimizes combined ordering and inventory holding cost.
EOQ is a useful starting point but practical planning must add MOQ, price breaks, cash limits, seasonality, and variable demand.