GlossaryEN1 min readUpdated: Jun 22, 2026

Economic Order Quantity

The Economic Order Quantity (EOQ) is the order size at which the combined total of ordering costs and holding costs reaches its minimum.

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Last updated: 22 June 2026Published: 19 June 2025

Source: https://en.wikipedia.org/wiki/Economic_order_quantity

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Definition & Explanation

The Economic Order Quantity (EOQ) is the order size at which the combined total of ordering costs and holding costs reaches its minimum. Ordering costs cover administration, freight, and processing fees; holding costs include capital tied up in inventory, warehouse space, insurance, and shrinkage. The standard EOQ formula balances these two cost blocks: high ordering costs favor larger, less frequent orders, while high holding costs point toward smaller, more frequent replenishment. Procurement and supply chain planners use EOQ as a starting figure, then adjust it for supplier minimum order quantities, demand variability, and target safety stock levels. EOQ should not be confused with the reorder point, which defines when to order, not how much.

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Economic Order Quantity

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