Economic Order Quantity (EOQ)

EOQ finds the order size that balances two opposing costs: ordering too frequently in small batches raises total ordering costs, while ordering too rarely in large batches raises total holding (storage, capital) costs. EOQ is the quantity where those two costs are minimized in total.

The classic EOQ formula assumes steady, predictable demand and fixed cost-per-order — real demand volatility (seasonality, promotions) means EOQ is usually treated as a useful starting point rather than a rule to follow exactly every order cycle.