E-commerce EOQ Calculator

About the E-commerce EOQ Calculator

The Economic Order Quantity (EOQ) model determines the optimal order size that minimizes the total cost of inventory, balancing ordering costs against holding costs. Order too frequently and you spend too much on logistics and purchase orders; order too much at once and you waste money on storage and tied-up capital.

For e-commerce sellers, EOQ is especially valuable when managing multiple SKUs with varying demand rates and cost structures. The classic EOQ formula uses annual demand, cost per order (shipping, processing, inspection), and annual holding cost per unit to calculate the sweet spot.

This calculator implements the Wilson EOQ formula and shows you the total annual cost, number of orders per year, and time between orders. It helps you build a disciplined ordering cadence that minimizes costs while maintaining adequate stock.

When This Page Helps

EOQ removes the guesswork from order sizes. Instead of ordering arbitrary quantities or simply rounding to supplier MOQs, you calculate the quantity that genuinely minimizes your total inventory cost. Even approximating EOQ can save 10–20% on annual inventory expenses.

How to Use the Inputs

1. Enter your annual demand in units for the product.
2. Enter the cost per order (shipping, handling, processing per purchase order).
3. Enter the annual holding cost per unit (storage, insurance, depreciation, opportunity cost).
4. Review the optimal order quantity and ordering frequency.
5. Compare EOQ against supplier MOQs and adjust if needed.
6. Use the results to set up a regular ordering schedule.

Example Calculation

Tips & Best Practices

• EOQ is a starting point — adjust for supplier MOQs, volume discounts, and practical constraints.
• Include all order costs: shipping, customs, inspection, receiving labor, and purchase order processing.
• Holding costs typically run 20–30% of item value annually (storage + insurance + opportunity cost).
• Recalculate EOQ when demand, shipping costs, or storage costs change significantly.
• For seasonal products, calculate separate EOQs for peak and off-peak periods.
• Rounding EOQ to the nearest case pack or pallet layer often provides practical benefits.

EOQ Assumptions and Limitations

The classic EOQ model assumes constant demand rate, fixed costs per order, constant holding costs, and no quantity discounts. Real-world e-commerce rarely meets all these assumptions perfectly, but EOQ still provides a valuable baseline that outperforms intuitive ordering.

EOQ with Quantity Discounts

When suppliers offer volume discounts, the optimal order quantity may differ from the basic EOQ. Compare the total cost at EOQ with the total cost at each price break quantity. Sometimes ordering more than EOQ is cheaper when the unit cost reduction offsets the increased holding cost.

Applying EOQ Across Your Catalog

Calculate EOQ for each SKU individually, then aggregate to plan shipping containers and purchasing schedules. Group products with similar lead times into combined orders to share shipping costs, adjusting individual quantities to approximate their respective EOQs.

Frequently Asked Questions

• What is Economic Order Quantity?

  EOQ is the order quantity that minimizes the total cost of ordering and holding inventory. It balances the trade-off: ordering more frequently reduces holding costs but increases ordering costs, while ordering less frequently does the opposite.

• What costs go into the order cost (S)?

  Order cost includes everything incurred each time you place an order: freight and shipping, customs duties, receiving and inspection labor, purchase order processing time, bank transfer fees, and any per-shipment insurance costs. Underestimating order cost leads to an EOQ that is too small, resulting in more frequent orders and higher total costs than necessary.

• How do I calculate holding cost per unit?

  Holding cost includes storage fees, insurance, depreciation/obsolescence risk, and the opportunity cost of capital. A common estimate is 20–30% of the unit's value per year. For FBA sellers, use Amazon's monthly storage fee structure.

• Does EOQ work for products with variable demand?

  Classic EOQ assumes constant demand. For variable demand, recalculate EOQ periodically using recent demand trends. Some businesses adjust EOQ seasonally. The model still provides a good baseline even when demand fluctuates moderately.

• What if my supplier has a minimum order quantity (MOQ)?

  If the supplier's MOQ exceeds your EOQ, evaluate the cost difference. Sometimes ordering the MOQ is still cost-effective due to volume discounts. If the MOQ is significantly above EOQ, negotiate with the supplier or find alternative sources.

• Can EOQ be too small?

  Yes. Very small EOQs mean frequent ordering, which can overwhelm your operations team and strain supplier relationships. Practical minimums include case pack quantities, minimum container fills, and the operational capacity to receive shipments.