Economic order quantity (EOQ)
The order size that keeps the cost of ordering plus the cost of holding stock as low as possible for an item.
Every order has a fixed cost (time, shipping, paperwork) and every unit in stock has a holding cost (money tied up, space, risk). Ordering often in small amounts costs more in orders; ordering rarely in large amounts costs more in holding. EOQ is the point between the two.
The classic formula is √(2 × yearly demand × cost per order ÷ yearly holding cost per unit). For 1,200 units a year, €30 per order and €2 to hold a unit for a year, EOQ is √(2 × 1,200 × 30 ÷ 2), about 190 units. It assumes steady sales and prices, so use it as a starting point and adjust for minimum orders and discounts.
