{"id":969,"date":"2022-05-07T17:16:44","date_gmt":"2022-05-07T17:16:44","guid":{"rendered":"https:\/\/www.telesto.app\/blog\/?p=969"},"modified":"2025-06-08T21:23:21","modified_gmt":"2025-06-08T21:23:21","slug":"how-much-products-to-buy","status":"publish","type":"post","link":"https:\/\/www.telesto.app\/blog\/2022\/05\/07\/how-much-products-to-buy\/","title":{"rendered":"How much product should you buy?"},"content":{"rendered":"<p>If you&#8217;re looking to reduce inventory logistics costs, you&#8217;ll need to determine the optimal number of units to purchase when it&#8217;s time to restock.<\/p>\n\n<p>Back in 1915, Harris from General Electric introduced a formula to help inventory managers and retailers figure out how much product to buy.<\/p>\n\n<p>This formula is known as the Economic Order Quantity (EOQ). It&#8217;s one of the most important inventory control tools and helps optimize supply chain logistics while keeping costs low.<\/p>\n\n<p>Here are the assumptions behind the EOQ model:<\/p>\n<ul>\n  <li>Demand is known and constant throughout the year<\/li>\n  <li>All costs (including reorder costs) are known and fixed<\/li>\n  <li>Delivery is instant as soon as the order is placed<\/li>\n<\/ul>\n\n<p>To calculate EOQ, you\u2019ll need the following:<\/p>\n\n<p><strong>D<\/strong> = demand <em>(total number of units sold annually)<\/em><br>\n<strong>RC<\/strong> = reorder cost <em>(cost of placing each order, including equipment and quality checks)<\/em><br>\n<strong>HC<\/strong> = holding cost <em>(yearly cost of holding one unit, including warehousing and insurance)<\/em><\/p>\n\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-978\" src=\"https:\/\/www.telesto.app\/blog\/wp-content\/uploads\/2022\/05\/eoq-formula.png\" alt=\"\" width=\"366\" height=\"86\" srcset=\"https:\/\/www.telesto.app\/blog\/wp-content\/uploads\/2022\/05\/eoq-formula.png 366w, https:\/\/www.telesto.app\/blog\/wp-content\/uploads\/2022\/05\/eoq-formula-300x70.png 300w, https:\/\/www.telesto.app\/blog\/wp-content\/uploads\/2022\/05\/eoq-formula-363x86.png 363w\" sizes=\"auto, (max-width: 366px) 100vw, 366px\" \/><\/p>\n\n<blockquote>\n  <p><strong>Example:<\/strong><\/p>\n  <p>D = 2,000 units\/year<br>\n  RC = $160<br>\n  HC = $4 per unit\/year<\/p>\n  <p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-986 size-full\" src=\"https:\/\/www.telesto.app\/blog\/wp-content\/uploads\/2022\/05\/eoq-formula-latex.png\" alt=\"\" width=\"556\" height=\"108\" srcset=\"https:\/\/www.telesto.app\/blog\/wp-content\/uploads\/2022\/05\/eoq-formula-latex.png 556w, https:\/\/www.telesto.app\/blog\/wp-content\/uploads\/2022\/05\/eoq-formula-latex-300x58.png 300w\" sizes=\"auto, (max-width: 556px) 100vw, 556px\" \/><\/p>\n  <p><em>The optimal order quantity is 400 units per order.<\/em><\/p>\n<\/blockquote>\n\n\n<p>&nbsp;<\/p>\n\n\n<p>To calculate how many orders you&#8217;ll need to place in a year, divide the annual demand by the EOQ. This result is called the period order quantity. Based on the previous example, you\u2019d expect 5 orders per year:<\/p>\n\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-995\" src=\"https:\/\/www.telesto.app\/blog\/wp-content\/uploads\/2022\/05\/period-order-quantity.png\" alt=\"\" width=\"327\" height=\"81\" srcset=\"https:\/\/www.telesto.app\/blog\/wp-content\/uploads\/2022\/05\/period-order-quantity.png 327w, https:\/\/www.telesto.app\/blog\/wp-content\/uploads\/2022\/05\/period-order-quantity-300x74.png 300w\" sizes=\"auto, (max-width: 327px) 100vw, 327px\" \/><\/p>\n\n<p>While EOQ doesn\u2019t account for every possible variable, it\u2019s a great way to find the ideal balance of order size and frequency for a given demand level. It can help you save money, boost profits, and streamline your inventory.<\/p>\n\n<hr>\n\n<p><a href=\"https:\/\/www.telesto.app\/resources\/EOQ-Calculator-Inventory-Management.xlsx\">Download our economic order quantity (EOQ)<\/a> Excel template for free. Try it with your own numbers or explore the examples included.<\/p>\n\n<p>To learn more about EOQ, visit: <a href=\"https:\/\/www.investopedia.com\/terms\/e\/economicorderquantity.asp\" target=\"window\" rel=\"noopener\">Investopedia \u2014 The evolution of accounting<\/a>.<\/p>\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>If you&rsquo;re looking to reduce inventory logistics costs, you&rsquo;ll need to determine the optimal number of units to purchase when&hellip;<\/p>\n","protected":false},"author":1,"featured_media":972,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13],"tags":[],"class_list":["post-969","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-english-en"],"_links":{"self":[{"href":"https:\/\/www.telesto.app\/blog\/wp-json\/wp\/v2\/posts\/969","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.telesto.app\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.telesto.app\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.telesto.app\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.telesto.app\/blog\/wp-json\/wp\/v2\/comments?post=969"}],"version-history":[{"count":9,"href":"https:\/\/www.telesto.app\/blog\/wp-json\/wp\/v2\/posts\/969\/revisions"}],"predecessor-version":[{"id":1506,"href":"https:\/\/www.telesto.app\/blog\/wp-json\/wp\/v2\/posts\/969\/revisions\/1506"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.telesto.app\/blog\/wp-json\/wp\/v2\/media\/972"}],"wp:attachment":[{"href":"https:\/\/www.telesto.app\/blog\/wp-json\/wp\/v2\/media?parent=969"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.telesto.app\/blog\/wp-json\/wp\/v2\/categories?post=969"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.telesto.app\/blog\/wp-json\/wp\/v2\/tags?post=969"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}