Order the right quantity at the right time — EOQ, reorder point and safety stock.
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The economic order quantity (EOQ) is the order size that minimises your total inventory cost by balancing two opposing forces: ordering too often (high ordering costs) versus holding too much stock (high carrying costs). The reorder point is the stock level that should trigger your next order, based on demand during the lead time plus a safety-stock buffer.
Enter annual demand, cost per order, holding cost per unit and lead time to get your EOQ, reorder point, orders per year and total annual inventory cost.
Enter annual demand, order cost and holding cost.
Add lead time and safety stock.
See your EOQ and reorder point.
Plan orders that minimise total cost.
EOQ is the order quantity that minimises total inventory cost. The formula is EOQ = √(2 × annual demand × order cost ÷ holding cost per unit).
Reorder point = (daily demand × lead time in days) + safety stock. It's the inventory level at which you should place your next order.
It's extra inventory held as a buffer against demand spikes or supplier delays, so you don't run out during the lead time.
At the EOQ, annual ordering cost and annual holding cost are equal; ordering more or less than this raises total cost.