Economic Order Quantity (EOQ)

EOQ is the classic answer to "how much should I order?" It finds the batch size where your ordering costs and your holding costs are as low as they'll get together. Order too little and you're paying order fees and freight constantly. Order too much and cash sits in a warehouse accruing storage fees.

The formula is old but still sharp: EOQ = square root of (2 × annual demand × cost per order ÷ holding cost per unit per year). Punch in your yearly unit demand, what one purchase order costs you (supplier setup, freight, the PO overhead), and what it costs to hold one unit for a year.

For FBA, the holding cost is the part people undercount. It's not just warehouse rent — it's Amazon's monthly storage fee, the risk of long-term storage charges if it sits past a year, the cash you can't spend elsewhere, and the product that ages out of style. Use a real holding number, not a guess, or the EOQ comes out too low and you reorder constantly.

The tool also shows how many orders a year that implies and the average time between them. If EOQ says order 2,000 but your inbound cap barely allows 200 a shipment, reality overrides the textbook — you'll make more shipments and the real cost is higher.

EOQ assumes steady demand, which your Q4 will laugh at. Treat it as the baseline for your normal months, then order harder going into peak season when stockouts cost the most. It's a floor for thinking, not a command.