ORDER-SIZE MODELS & ASSUMPTIONS
Economic Order Quantity (EOQ)
Economic order quantity is a model for selecting an order size that balances ordering and holding costs under stated assumptions. The classical formula is the square root of 2 × demand × cost per order ÷ holding cost per unit for the same period.
ECONOMIC ORDER QUANTITY IN PRACTICE
- Define compatible inputsUse matching demand and cost periods.
- Calculate the modelApply the formula with clear assumptions.
- Review the feasible orderCheck pack, supply and storage limits.
Use the agreed units, actual records and approved procedures for your operation.
A WORKED EXAMPLE
Illustrative EOQ: 1,000 units.
Assume annual demand of 10,000 units, order cost of 50 currency units and annual holding cost of 1 per unit. The classical calculation gives √(2 × 10,000 × 50 ÷ 1) = 1,000 units. These are invented inputs, not a recommended stock policy.
WHAT THIS MEANS FOR YOUR QUOTE
Agree the requirement before comparing quotes
Use the actual shipment, stock and service requirements. Record the billing unit, included work and responsibility for exceptions.
A LITTLE MORE CONTEXT
Questions about Economic Order Quantity
Does EOQ determine the reorder trigger?
Not by itself. Timing needs a separate policy.
Can units and periods be mixed?
No. Use compatible inputs.
Does EOQ guarantee no shortages?
No. The simplified model does not resolve all uncertainty.
Source & example notes
Oracle: economic order quantity calculation.
Sources provide background on the linked topic. Product documentation describes a particular implementation; confirm the rules, contract and procedures that apply to your operation.
Quantities, costs and scenarios are illustrative, not operating targets, approved handling instructions or guarantees. Source guidance reviewed 22 October 2026.
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