Supply Chain Inventory Calculator
Two Different Questions, Two Different Formulas
Inventory planning really asks two separate questions: how much should I order at a time, and when should I place that order? The first is an economic trade-off between ordering too often (paying setup and freight costs repeatedly) and ordering too rarely (tying up cash in stock sitting on shelves). The second is a timing question driven by how fast stock depletes and how long a replacement order takes to arrive.
The Formulas
Reorder Point = (Daily Demand × Lead Time) + Safety Stock
EOQ finds the order size that minimizes the combined cost of placing orders and holding inventory — it grows with demand and order cost, and shrinks as holding cost rises. The reorder point instead answers "when," calculating how much stock is consumed during the supplier's lead time and adding a safety-stock buffer for demand variability or delivery delays.
EOQ Falls as Holding Cost Rises
| Holding cost/unit/year | EOQ | Orders per year |
|---|---|---|
| $1.00 | 1,000 units | 10.0 |
| $2.00 | 707 units | 14.1 |
| $5.00 | 447 units | 22.4 |
| $10.00 | 316 units | 31.6 |
EOQ scales with the square root of demand and order cost, so quadrupling demand only doubles the optimal order size — not a proportional increase.
Where This Matters
- Purchasing cadence — EOQ sets an order size that balances freight/setup costs against warehousing and capital costs, rather than guessing at round numbers.
- Avoiding stockouts — the reorder point tells a warehouse team exactly when to trigger the next purchase order so stock doesn't run out mid-lead-time.
- Safety stock sizing — building a buffer into the reorder point absorbs the demand spikes and supplier delays that a pure average-demand calculation would miss.
How to Use This Calculator
- Choose a mode: Economic Order Quantity (EOQ) or Reorder Point.
- For EOQ, enter Annual Demand (units), Order Cost per Order, and Holding Cost per Unit per Year.
- For Reorder Point, enter Daily Demand, Lead Time in days, and optionally Safety Stock.
- Select Calculate to get the recommended order quantity or the inventory level that should trigger a new order.
Related Calculations
Once you know how much and when to order, estimate the shipping side with the Freight Cost Calculator, or check how much of a container that order will fill with the Container Fill Rate Calculator.