EOQ Calculator, Reorder Point and Safety Stock - Inventory Management | Federico Calo
Calculate Economic Order Quantity (EOQ), reorder point (ROP), and safety stock with classical formulas for inventory management. Optimize storage costs by reducing overall warehouse expenses.
L'EOQ (Economic Order Quantity) è la quantità ottimale da ordinare per minimizzare la somma dei costi di ordinazione e dei costi di mantenimento a magazzino. La formula, introdotta da Ford W. Harris nel 1913, bilancia i costi di ordinazione con quelli di giacenza: EOQ = √(2DS/H), dove D è la domanda annua, S il costo per ordine e H il costo di mantenimento unitario annuo.
Il Reorder Point (ROP) indica il livello di scorta al quale emettere un nuovo ordine per non incorrere in stock-out durante il lead time del fornitore: ROP = d × L + Safety Stock. La Scorta di Sicurezza protegge dalla variabilità della domanda e dai ritardi di consegna: SS = z × σ_d × √L, dove z è il z-score del livello di servizio desiderato.
This tool calculates EOQ, ROP, Safety Stock, inventory peak, annual orders, and optimized total yearly cost. Enter your supply chain parameters to get real-time optimization metrics - calculations done in the browser, no data sent to servers.
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Frequently Asked Questions
What is the Economic Order Quantity?
Optimal order quantity is the amount to order to minimize total inventory cost. The classic Harris formula balances ordering costs (which decrease with increasing order quantities) with maintenance costs (which increase with inventory levels). EOQ = √(2DS/H), where D is annual demand, S is ordering cost per unit, and H is annual maintenance cost per unit.
How is the Reorder Point (ROP) calculated?
Reorder Point (reorder point) is the stock level that signals when to issue a new order. Formula: ROP = d × L + SS, where d is daily demand average, L lead time in days and SS safety stock. When warehouse falls below ROP, order EOQ units immediately.
What is the safety stock?
Buffer of security is a buffer against the variability of demand and supplier delays. Formula: SS = z × σ_d × √L, where z is the service level score, σ_d is the standard deviation of daily demand, and L is the lead time in days. With z = 1.65 (95% service level) and σ_d = 10 units/day on a lead time of 9 days, the safety stock is approximately 50 units.
What are the limits of the EOQ model?
Classic EOQ model assumes constant demand and continuous, fixed ordering and maintenance costs, no quantity discounts, and deterministic lead time. In practice, seasonal demand, promotions, changes in capital cost or volume agreements with suppliers may require more complex models (EOQ with discount, probabilistic EOQ model, MRP/DRP systems).
How do I select the Z-score for service level?
The z-score depends on the desired service level (probability of not running out of stock during lead time): z = 1.28 for 90%, z = 1.65 for 95%, z = 2.05 for 98%, z = 2.33 for 99%, z = 3.09 for 99.9%. A higher level reduces stockouts but increases safety stock and maintenance costs. Evaluate cost/service balance based on product and customer segment.
How is it used?
- Insert question parameters
Fill in the annual question (A), daily average question (a), and its standard deviation (σ). Use historical data from last year's fiscal period to increase accuracy.
- Set warehouse costs
Insert the cost for each order (S - includes administrative costs, shipping, reception) and annual maintenance cost per unit (H - includes fixed assets, insurance, obsolescence).
- Configure Lead Time and Service Level
Insert lead time from supplier in days (L) and select the z-score for desired service level: 1.28 → 90%, 1.65 → 95%, 2.05 → 98%, 2.33 → 99%.
- Interpret results
Optimal Order Quantity is the amount to order each time. The Reorder Point indicates the level of stock at which a new order should be issued. Safety Stock protects against demand fluctuations and supplier delays.
Vocabulary Formulas
- EOQ = √(2DS / H)
- Economic Quantity of Order. D = Annual Demand (units/year), S = Order Cost (€/order), H = Unit Maintenance Cost (€/unit/year).
- ROP = d × L + SS
- Daily Average Demand / Lead Time / Security Stock
- SS = z × σ_d × √L
- Security Alert.
- TC = (D/EOQ)×S + (EOQ/2)×H
- Annual total cost at optimal EOQ. The formula ensures the balance between ordering costs and maintenance costs.
Do you need a custom analysis?
This tool is free and informative. For in-depth analysis with AI on-prem - private data, zero cloud - contact Federico.