Economic Lot Size Calculator
Order too little and you pay for order after order: admin time, delivery charges and setup costs pile up. Order too much and the stock sits in the warehouse, tying up cash and adding storage, insurance and spoilage costs every month. The economic lot size calculator finds the order quantity where those two costs balance, using the classic EOQ formula: annual demand, ordering cost per order, and carrying cost per unit per year.
Quick Answer
With annual demand of 12,000 units, an ordering cost of $100 per order and a carrying cost of $5 per unit per year, the economic lot size is 692.82 units per order. Ordering about 693 units at a time, roughly 17.32 orders a year, keeps annual ordering cost and annual carrying cost equal at about $1,732.05 each, for a lowest combined cost of about $3,464.10 a year.
Key takeaways
- Economic lot size and EOQ are the same calculation: the order quantity that minimises ordering cost plus carrying cost.
- The result is a quantity per order, not a reorder date. It tells you how much to order, never when to order.
- At the optimum the two annual costs match. If your ordering cost is far above your carrying cost, your lots are too small, and the reverse means they are too big.
- The purchase price of the goods is not an input, because in the basic model it is the same total whatever lot size you choose.
- Quick Answer
- How to use the economic lot size calculator
- The economic lot size formula and where it comes from
- Worked example: 12,000 units a year at $100 per order
- What the EOQ model assumes, and when it misleads
- What competing calculators miss
- Frequently asked questions
- Add This Calculator to Your Website
- References
How to use the economic lot size calculator
Enter three figures for one item, then click Calculate. Run it once per product: mixing items with different demand or costs into one calculation gives a lot size that fits none of them.
- Annual demand: units sold or used in a year. Last year's sales are the usual starting point; adjust for growth you can actually justify.
- Ordering cost per order: everything it costs to place and receive one order, regardless of size. Add up admin time, purchase order processing, delivery or freight charged per drop, and goods-in inspection.
- Carrying cost per unit per year: what one unit costs you while it sits in stock for a year. Warehouse space, insurance, spoilage and shrinkage, plus the interest or opportunity cost on the cash locked in that unit.
Read the result as a working quantity, then round it to the pack, case or pallet size your supplier actually ships. Rounding 692.82 to 700 barely moves the total cost, because the cost curve is flat near the optimum.
The economic lot size formula and where it comes from
The formula is EOQ = square root of (2 × D × S ÷ H), where D is annual demand in units, S is ordering cost per order and H is carrying cost per unit per year.
Annual ordering cost = (D ÷ Q) × S, where Q is the lot size
Annual carrying cost = (Q ÷ 2) × H, because stock runs from Q down to zero, so average stock is Q ÷ 2
Total relevant cost = (D ÷ Q) × S + (Q ÷ 2) × H, lowest where the two lines cross
The model is old and well documented. Ford W. Harris first published it in 1913, and the INFORMS Operations Research history of Harris and the EOQ model traces how the formula spread and why its origin was confused for decades. Later work, including the European Journal of Operational Research review of economic order quantities in production, extends the same lot size logic to production runs, where S becomes a setup cost rather than a purchase order cost. That is why the same calculator serves a buyer reordering finished goods and a factory planner sizing a batch.
Worked example: 12,000 units a year at $100 per order
A distributor sells 12,000 units a year of one product. Placing and receiving an order costs $100 all-in, and holding one unit for a year costs $5.
| Lot size tried | Orders per year | Annual ordering cost | Annual carrying cost | Combined cost |
|---|---|---|---|---|
| 300 units | 40.00 | $4,000.00 | $750.00 | $4,750.00 |
| 692.82 units (EOQ) | 17.32 | $1,732.05 | $1,732.05 | $3,464.10 |
| 1,500 units | 8.00 | $800.00 | $3,750.00 | $4,550.00 |
Combined ordering plus carrying cost, by lot size:
Notice the shape: ordering in lots that are too small is the most expensive mistake in this example, at $4,750 a year, because 40 orders at $100 each swamp the small carrying saving. The EOQ lot cuts that combined bill by $1,285.90 a year against the 300-unit habit, with no change to the product, the supplier or the price paid for the goods themselves. The same per-unit division logic sits behind a cost per unit calculator: totals only become decisions once they are expressed per unit or per order.
What the EOQ model assumes, and when it misleads
The basic model assumes steady demand, a fixed ordering cost, a fixed carrying cost per unit, the whole order arriving at once, and no stockouts. Real warehouses break most of those at some point in the year, so treat the answer as a strong starting quantity, then adjust.
- Seasonal demand: run the calculator separately for peak and off-peak demand instead of averaging the year away. Pair it with your average daily demand pattern to see how uneven the year really is.
- Quantity discounts: the basic formula ignores price breaks. If a discount tier starts just above the EOQ, compare total cost including the purchase price at both quantities before deciding.
- Perishables and fashion: raise the carrying cost to include realistic spoilage or markdown risk. A higher H pulls the lot size down, which is usually the right direction for short-life stock.
- Lead time and safety stock: EOQ does not set them. How long stock lasts is a separate question, covered by a days of supply calculator, and your reorder trigger needs lead-time demand plus a safety buffer on top of the lot size.
Inventory control references such as the GlobalSpec overview of classic inventory control techniques make the same point: the lot size formula is one piece of a replenishment policy, alongside reorder points, review periods and service levels. Recent research on EOQ systems and ordering and holding cost reduction also stresses that S and H are not fixed facts of nature: automating purchase orders lowers S, and better warehouse practice lowers H, and either change shifts the optimal lot.
What competing calculators miss
Most EOQ tools online return a single number and stop. The number is correct, but on its own it leaves the decisions that matter unanswered.
- No cost check at the answer: few show that ordering and carrying costs are equal at the EOQ, or what nearby lot sizes cost. The table above is the sanity check: if your current lot size costs far more than the EOQ row, the gap is real money.
- No rounding guidance: a result like 692.82 units cannot be ordered as printed. Suppliers ship cases and pallets, and the flat cost curve near the optimum means rounding is safe, a point most tools never mention.
- No assumptions warning: tools that present EOQ as an exact instruction, with no mention of discounts, seasonality or lead time, set buyers up to apply a steady-demand answer to an unsteady product.
- Confusion with other lot size tools: this page is about inventory and production lots. It has nothing to do with trading position size, and it does not set reorder points or safety stock, however many tools blur those jobs together.
Frequently asked questions
Yes. Economic lot size, economic order quantity and optimum lot size are names for the same calculation: the square root of (2 × annual demand × ordering cost) divided by carrying cost per unit per year. Lot size is the older production term, from Harris's 1913 work on how many parts to make at once; EOQ is the term most purchasing teams use today.
Add up what one unit costs you while stored for a year: its share of warehouse rent and handling, insurance, expected spoilage or shrinkage, and the cost of the cash tied up in it. A common shortcut is to take 20% to 30% of the unit's purchase value per year and divide by one unit, so a $20 item at a 25% carrying rate has an H of $5. Enter that per-unit figure, not the warehouse total.
Only the costs that happen once per order, whatever the order size: staff time to raise and approve the purchase order, per-delivery freight or courier charges, receiving and inspection time, and any supplier order fee. The price of the goods themselves is not an ordering cost, and neither are per-unit picking or packing charges, which belong in unit cost instead.
Because you buy the same total number of units in a year whatever lot size you choose, so the purchase total does not change with Q and cannot affect which Q is cheapest. Price only enters the decision when a supplier offers quantity discounts, because then larger lots genuinely cost less per unit and a discount comparison has to be run alongside the basic formula.
Round to the nearest practical pack, case or pallet quantity, in either direction. Total cost rises very slowly as you move away from the exact EOQ, so ordering 700 instead of 692.82 in the worked example changes the annual combined cost by only a few dollars. Never round so far that you are effectively back at your old lot size.
No. It gives the quantity per order only. The reorder point is a separate figure: daily demand multiplied by supplier lead time in days, plus safety stock. You need both numbers for a working policy, the lot size for how much and the reorder point for when.
Yes, with one adjustment in how you think about S. For a production batch, S is the setup cost of the run: machine changeover, tooling and first-off inspection. Enter annual demand for the part and its carrying cost as usual. Strictly, gradual production during the run uses a variant called the economic production quantity, which gives a somewhat larger batch, so treat this result as the conservative starting point.
Recalculate when demand, ordering cost or carrying cost changes materially, and review at least once a year. Because the formula uses a square root, the lot size moves less than the inputs do: demand doubling only raises the EOQ by about 41%, so small forecast errors do not wreck the answer.
Add This Calculator to Your Website
Embed this calculator on your own site with the code below. Pick a size to preview it live, then copy the code.
Powered by Calculator Zilo
References
- Erlenkotter, D. Ford Whitman Harris and the Economic Order Quantity Model, Operations Research. Accessed October 21, 2026.
- LineNow. EOQ Formula: Economic Order Quantity, Example, and Reorder Limits. Accessed October 21, 2026.
- ScienceDirect. Economic Order Quantities in Production: From Harris to Economic Lot Scheduling Problems. Accessed October 21, 2026.
- GlobalSpec. Classic Techniques: Inventory Control and Probability Models. Accessed October 21, 2026.
- MDPI. Analytics Investment in EOQ Systems: Joint Ordering and Holding Cost Reduction. Accessed October 21, 2026.