Calculate optimal order quantity with ordering costs, holding costs, and total cost curve visualization with reorder point.
This calculator balances the annual cost of placing replenishment orders against the annual cost of carrying cycle stock. Enter annual unit demand, cost per order, annual holding cost per unit, and the demand and lead-time values needed for a reorder point. It reports the economic order quantity and plots ordering, holding, and combined relevant cost around that quantity. The common surprise is that EOQ and reorder point answer different questions: EOQ says how much to order, while reorder point says when to order.
A concrete input and expected output from the current implementation.
Input
Annual demand: 1,000 units/year Ordering cost: $20/order Holding cost: $16/unit/year
Expected output
EOQ: 50 units. At that quantity, annual ordering cost is $400, annual holding cost is $400, and combined relevant annual cost is $800.
Q = sqrt((2 x 1,000 x 20) / 16) = sqrt(2,500) = 50. Ordering cost is (1,000 / 50) x $20 = $400, while holding cost is (50 / 2) x $16 = $400.
Economic order quantity is sqrt(2DS/H), where D is annual demand in units, S is the cost of placing one order, and H is annual holding cost for one unit. At this quantity, annual ordering cost, (D/Q)S, equals annual cycle-stock holding cost, (Q/2)H. Their sum reaches the minimum of the displayed cost curve.
The basic reorder point is demand expected during replenishment lead time: demand per day multiplied by lead-time days. It is separate from EOQ and does not change the cost-minimizing order size. Without an added safety-stock allowance, this deterministic trigger contains no buffer for forecast error, late delivery, or an unexpected demand increase.
In the basic EOQ model, increasing the order quantity reduces the number of orders but raises average cycle stock. The minimum occurs where (D/Q)S and (Q/2)H are equal. If the displayed quantity is rounded to a whole unit, the two amounts may differ slightly even though they match at the unrounded optimum.
No, not as a complete inventory policy. EOQ can remain a baseline order size, but a deterministic reorder point does not protect against uncertain demand or supplier delays. When either varies materially, pair the order-size analysis with a separately justified safety-stock and service-level method; otherwise the calculated trigger can produce stockouts.
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