Glossary
Economic Order Quantity (EOQ)
Economic Order Quantity is the optimal order size that minimizes the total cost of ordering and holding inventory.
Full explanation
The classic EOQ formula balances ordering costs (fixed cost per purchase order) against holding costs (storage, insurance, capital cost per unit per year): EOQ = √(2DS/H), where D is annual demand, S is ordering cost per order, and H is holding cost per unit per year.
EOQ helps businesses avoid both excessive ordering frequency (which increases ordering costs) and unnecessarily large inventory holdings (which increase carrying costs). The optimal point is where the total of ordering and holding costs is minimized. While the classic formula assumes constant demand and instant delivery, it provides a useful baseline that can be adjusted for real-world variability.
Formula
EOQ = √(2DS / H)How Stocklyst handles this
Stocklyst uses EOQ principles as part of its max level and order quantity calculations. By factoring in demand rate and cost parameters, the system helps determine order sizes that balance ordering frequency against carrying costs.
Related terms
Related use cases
Put economic order quantity (eoq) management on autopilot
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