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EOQ answers 'how much should I order?' — the quantity that minimizes the sum of ordering costs (which favor big, rare orders) and holding costs (which favor small, frequent ones). The formula: EOQ = √(2DS ÷ H), with a worked example below.
Every order carries fixed costs — admin time, freight minimums, customs handling — so ordering rarely in bulk looks cheap. But every unit sitting in storage carries holding costs — space, tied-up cash, insurance, obsolescence risk — so big orders are expensive to keep. EOQ is the mathematical balance point: EOQ = √(2DS ÷ H) where D = annual demand (units), S = cost per order, H = annual holding cost per unit (a common estimate: 25% of unit cost).
A product sells 5,000 units/year; each order costs ~$50 to place and receive; holding one unit for a year costs $4. EOQ = √(2 × 5,000 × 50 ÷ 4) = √125,000 ≈ 354 units per order, roughly 14 orders a year. Pair it with the reorder point (when to order) and safety stock (the buffer) and you have a complete replenishment policy for the product.
Yeer's reorder suggestions use forecast-driven cover targets with your MOQs and lead times factored in — the practical evolution of EOQ for stores where demand won't sit still. See demand forecasting.
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EOQ = √(2DS / H), where D is annual demand in units, S is the fixed cost of placing one order (admin, shipping minimums), and H is the annual cost of holding one unit (storage, capital, insurance — often estimated at 20–30% of unit cost). It's the order size that minimizes total ordering + holding cost.
When ordering costs are meaningful (freight minimums, per-order fees) and demand is reasonably steady. For fast-moving products with volatile demand, days-of-cover targets driven by a live forecast usually beat a static EOQ.
Annual demand 5,000 units, $50 per order, $4 per unit per year to hold: EOQ = √(2 × 5000 × 50 / 4) ≈ 354 units per order — about 14 orders per year. Round to supplier case sizes or MOQ in practice.
They answer different questions: the reorder point says WHEN to order (demand during lead time + safety stock), EOQ says HOW MUCH to order, and safety stock says how much buffer to keep for surprises. A complete replenishment policy sets all three per product.
If your supplier's minimum order quantity exceeds the EOQ, you order the MOQ — the formula still tells you how far above optimal you're being pushed, which is useful for negotiating or for deciding a product isn't worth restocking.
Yeer suggests what to order and how much, per product, from live demand. Free up to 50 products.
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