Inventory Cost Optimization
Economic Order Quantity (EOQ): Minimize Holding & Ordering Costs
Calculate the optimal batch quantity your business should order to minimize total inventory management costs. Balances high ordering fees against warehouse carrying/holding costs.
EOQ Formula Variables
Wilson Formula: √((2DS)/H)
Total number of units sold or consumed over 12 months.
₹
Shipping, handling, customs, and procurement processing fees per PO.
₹
Storage space, insurance, financing interest, and obsolescence per unit/year.
Optimal Procurement Strategy
Optimal Order Quantity (EOQ)
671 Units / Order
Optimal Number of Orders / Year:
17.9 Orders
Order Cycle Frequency:
Every 20 Days
Annual Total Ordering Cost:
₹26,833
Annual Total Holding Cost:
₹26,833
Minimized Total Annual Inventory Cost:
₹53,666 / yr
How the Economic Order Quantity Formula Works
EOQ = √[ (2 × D × S) / H ]
Where:
• D = Annual Demand (units)
• S = Fixed Cost per Order (shipping & admin)
• H = Holding / Carrying cost per unit per year
At the exact EOQ point, Annual Ordering Cost equals Annual Holding Cost. This mathematical balance produces the absolute lowest possible overall expenditure.
Keep Inventory Costs Under Control with MakeGSTBill
Maintain accurate stock valuation using FIFO and weighted average methods across multiple warehouses.
