What is economic order quantity (EOQ)?

EOQ is the order size that minimizes the combined cost of ordering and holding inventory. Order too much at once and holding costs climb; order too little and you pay ordering costs more often. EOQ is the quantity where those two costs are lowest together.

Does EOQ work for Amazon FBA?

The logic works, but treat the EOQ output as a starting target rather than a final answer. Adjust it up to meet your supplier's minimum order quantity and down to fit your cash and FBA storage limits. On FBA, holding cost is a real monthly bill, which makes the holding-cost side of EOQ concrete.

December 16, 20257 min readInventory Planning

Economic Order Quantity (EOQ): FBA Formula and Use

Economic order quantity (EOQ) is the order size that minimizes ordering plus holding cost. The formula, a worked FBA example, and where MOQ overrides it.

T. Brian Jones

Co-founder & CTO, Inventory Hero

Frequently Asked Questions

What is economic order quantity (EOQ)?: EOQ is the order size that minimizes the combined cost of ordering and holding inventory. Order too much at once and holding costs climb; order too little and you pay ordering costs more often. EOQ is the quantity where those two costs are lowest together.
What is the EOQ formula?: EOQ = the square root of (2 x annual demand x cost per order / annual holding cost per unit). Annual demand is units sold per year, cost per order is what it costs to place and receive one order, and holding cost is what it costs to keep one unit in stock for a year.
Does EOQ work for Amazon FBA?: The logic works, but treat the EOQ output as a starting target rather than a final answer. Adjust it up to meet your supplier's minimum order quantity and down to fit your cash and FBA storage limits. On FBA, holding cost is a real monthly bill, which makes the holding-cost side of EOQ concrete.

Written by

T. Brian Jones

Co-founder & CTO, Inventory Hero

T. Brian Jones is co-founder and CTO of Inventory Hero. He leads the engineering behind its Amazon data pipeline, demand forecasting, and the AI platform that lets sellers talk to their live inventory, sales, and supplier data in plain language.

Related reading

← Back to all articles

What is the EOQ formula?

EOQ = square root of (2 x annual demand x cost per order / holding cost per unit per year)

The three inputs:

Annual demand is units sold per year for the SKU.

Cost per order is what it costs to place and receive one order: the admin time, inspection, and any per-shipment freight or handling overhead.

Holding cost per unit per year is what it costs to keep one unit in stock for a year: FBA storage, the cost of the cash tied up, and the risk of markdown or aging.

The square root is what produces the balance: doubling order size does not double total cost, so the optimum sits where the two cost curves cross.

Worked example

A SKU sells 6,000 units a year, each order costs about $120 to place and receive, and holding one unit for a year costs about $4:

Input	Value
Annual demand	6,000 units
Cost per order	$120
Holding cost per unit per year	$4

Input

Value

Annual demand

6,000 units

Cost per order

$120

Holding cost per unit per year

EOQ = square root of (2 x 6,000 x 120 / 4) = square root of 360,000 = 600 units. So ordering about 600 units at a time, roughly every 36 days at this demand, minimizes total ordering plus holding cost. Run your own inputs in the EOQ calculator.

The two inputs sellers find hardest are the costs themselves. A workable holding cost per unit per year is that unit's FBA storage across a year¹ plus the cost of the cash tied up in it (unit cost times your cost of capital), so a small standard-size item often lands at a few dollars a year and a bulky one much more. A workable cost per order is your admin time plus any fixed per-shipment freight, inspection, or prep overhead, which many sellers estimate at roughly one to two hundred dollars for an overseas purchase order. Neither has to be exact, because the square root makes EOQ forgiving of small errors in either input.

How EOQ relates to cycle stock and reorder quantity

The EOQ is essentially your target cycle stock per order, the working inventory you sell between replenishments. It feeds directly into how to calculate reorder quantity: EOQ tells you the efficient batch size, and your reorder math then adjusts it for what is already in transit and the cover you need. EOQ answers how much is efficient; the reorder point answers when to place it, and your safety stock sits underneath both.

Where FBA overrides the formula

EOQ is a starting target, not a final answer, because three real constraints reshape it:

Supplier MOQ. If your EOQ is 600 but the supplier's minimum order quantity is 1,000, you order 1,000. The formula bends to the floor.

Cash on hand. If 600 units is more than you can fund this cycle, order less and shorten the cycle. EOQ assumes unlimited cash; you do not have it.

FBA storage and aging. Holding cost on Amazon is a real monthly bill plus aged-inventory risk, which makes the holding-cost term larger than sellers expect and pulls EOQ toward smaller, more frequent orders for slow or bulky SKUs.

This is why EOQ is a guide, not a rule. It gets you to the right neighborhood; your constraints set the final number. For the full picture, see Amazon FBA restock planning.

The bottom line

Economic order quantity is the order size that minimizes ordering plus holding cost, found with EOQ = square root of (2 x demand x order cost / holding cost). Use it as the efficient starting target for your reorder quantity, then adjust to your MOQ, cash, and FBA storage reality.

Amazon FBA monthly inventory storage fee schedule, Amazon Seller Central, effective 2026. sell.amazon.com/pricing. ↩

Economic Order Quantity (EOQ): FBA Formula and Use

Frequently Asked Questions

T. Brian Jones

Related reading

Safety Stock for Lumpy Demand: S&S, Promos, Agentic Commerce

Amazon Inventory Financing: Sizing Your Funding Gap

De Minimis Ended for Amazon Sellers: Consolidate, Do Not Order Bigger

What is the EOQ formula?

Worked example

How EOQ relates to cycle stock and reorder quantity

Where FBA overrides the formula

The bottom line

Frequently Asked Questions

T. Brian Jones

Related reading

Safety Stock for Lumpy Demand: S&S, Promos, Agentic Commerce

Amazon Inventory Financing: Sizing Your Funding Gap

De Minimis Ended for Amazon Sellers: Consolidate, Do Not Order Bigger

What is the EOQ formula?

Worked example

How EOQ relates to cycle stock and reorder quantity

Where FBA overrides the formula

The bottom line

Footnotes