Calculator Inputs
Use order mode for purchased items and production mode for in-house manufacturing runs.
Example Data Table
| Scenario | Model | Annual Demand | Setup Cost | Holding Cost | Lead Time | Safety Stock |
|---|---|---|---|---|---|---|
| Motor housing | EOQ | 120,000 units | $850 | $6.50 | 8 days | 900 units |
| Gear blank | EPQ | 84,000 units | $1,150 | $5.20 | 5 days | 600 units |
| Fastener kit | EOQ | 240,000 units | $420 | $1.80 | 3 days | 1,200 units |
Formula Used
Economic Order Quantity: EOQ = √((2 × D × S) / H)
Economic Production Quantity: EPQ = √((2 × D × S / H) × (P / (P − d)))
Daily demand: d = D / W
Reorder point: ROP = (d × L) + SS
Annual setup cost: (D / Q) × S
Annual holding cost: Average inventory × H
Total annual cost: Setup cost + Holding cost + Annual unit cost
- D
- Annual demand in units.
- S
- Setup cost or order cost per cycle.
- H
- Annual holding cost per unit.
- P
- Production rate per day for in-house manufacturing.
- L
- Lead time in days.
- SS
- Safety stock in units.
- W
- Working days per year.
- Q
- Calculated lot size.
How to Use This Calculator
- Select the correct lot sizing model for purchased items or internal production.
- Enter annual demand, setup cost, and annual holding cost per unit.
- Add lead time, safety stock, and working days to calculate reorder timing.
- Provide production rate only when you use production mode.
- Set the lot multiple to align results with carton size or machine constraints.
- Click the calculate button to display the result summary above the form.
- Use the CSV or PDF buttons to save the current result set.
Frequently Asked Questions
1. What does a lot sizing calculator do?
It estimates the most economical replenishment quantity for inventory or production. The calculator balances setup effort, carrying cost, and demand so planners can reduce total annual inventory cost while maintaining smoother material availability.
2. When should I use EOQ instead of EPQ?
Use EOQ when items are purchased and delivered in full lots. Use EPQ when items are produced internally and inventory builds gradually while the line is running faster than demand consumption.
3. Why is holding cost entered per unit per year?
That value represents the yearly carrying expense for one unit in stock. It usually includes storage, insurance, capital cost, handling, obsolescence risk, and shrinkage exposure tied to inventory ownership.
4. What happens if I add a lot multiple?
The tool rounds the optimal quantity upward to the nearest practical multiple. This is helpful when packaging, pallet sizes, machine capacities, or supplier requirements force orders or runs into fixed increments.
5. How is reorder point different from lot size?
Lot size tells you how much to replenish each cycle. Reorder point tells you when to trigger that replenishment, based on expected lead time demand plus any safety stock buffer.
6. Why must production rate exceed daily demand in EPQ?
EPQ assumes inventory accumulates during the production run. If demand equals or exceeds the production rate, stock never builds, so the production quantity model becomes invalid for that situation.
7. Does the calculator include purchase cost in total annual cost?
Yes. When you enter unit cost, the calculator estimates annual purchase or production spend and adds it to setup and holding costs, giving a broader annual cost picture for planning reviews.
8. Can this tool replace a full MRP or ERP system?
No. It is best for quick planning analysis, policy checks, and what-if comparisons. Full planning systems still handle multi-level bills, constraints, schedules, and transaction-driven inventory execution.