Economic Order Quantity (EOQ) helps you balance the cost of ordering with the cost of holding inventory, so you’re always making the most cost-efficient purchasing decisions. Recurrency automatically calculates EOQ for each item and gives you tools to fine‑tune it to match your business goals.
This article is paired with two short videos—one explaining EOQ, and one showing how to adjust it. We recommend watching both for a complete understanding.
What is EOQ?
In the first video, Aaron explains the core concept of EOQ:
EOQ balances yearly demand, replenishment cost (per order), holding cost (storage, insurance, depreciation), and unit cost.
Recurrency calculates EOQ using your historical sales data, ordering costs, and holding costs.
EOQ is a key input in Max calculations alongside lead time and safety stock.
You’ll find EOQ displayed in the Planning tab of Recurrency.
Watch this short video to see how EOQ is calculated and used inside Recurrency:
Video 2: Adjusting EOQ
In the second video, Daniela shows how Admins can adjust EOQ levers to better align with business goals:
Replenishment Cost – The cost per order (default: $5).
Holding Cost Ratio – The % of an item’s cost attributed to storage per year (default: 20%).
Want higher Maxes / more stock on hand?
Lower the Holding Cost Ratio (e.g., 20% → 17%)
Or raise the Replenishment Cost (e.g., $5 → $7)
Want leaner inventory / faster turnover?
Raise the Holding Cost Ratio (e.g., 20% → 25%)
Or lower the Replenishment Cost (e.g., $5 → $3)
How to adjust:
Go to the Settings module.
Under Demand Planning settings, find Replenishment Cost and Holding Cost Ratio.
Enter your desired values.
Click Apply.
Changes are recalculated overnight, and new Max recommendations appear the next day.
Watch this video for a walkthrough and examples of how small adjustments can shift your EOQ strategy.
Key Takeaways
EOQ’s not just a formula—it’s a lever for inventory strategy.
Adjusting Replenishment Cost and Holding Cost Ratio helps align your Max recommendations with your operational goals.
Start with small adjustments to see how changes affect your inventory before making larger shifts.
For more information about EOQ, check out this article!