Supply Chain
Production Order Quantity (EPQ) Calculator
The run length for something you MAKE rather than buy. The order quantity everyone learns assumes a delivery lands all at once; a production run does not, because you are selling out of the batch while the batch is still being made. Stock therefore peaks well below the run size, holding costs less than it looks, and the right run is longer than the order quantity would tell you.
Inputs
- Annual demand — What you will sell or consume in a year.
- Setup cost per run — The whole cost of changing over to this product: labour, scrap, lost line time, and the first-run quality risk.
- Holding cost per unit per year — Storage, insurance, obsolescence and the cost of the money tied up in one finished unit for a year.
- Units produced per running day — The rate on a day the line is actually making this product, not an average across idle days.
- Units used or sold per day — Demand per day, over the days you operate.
How to use this calculator
- Use this when you MAKE the item. If a supplier delivers the whole order at once, the plain order quantity (EOQ) is the right model and this one overstates your run.
- Enter the setup cost honestly: the changeover labour, the scrap on the first pieces, the production time lost, and the quality risk of the first run after a change. Counting only the labour is what makes runs look cheaper to start than they are.
- Enter both daily rates over the same kind of day. Units made per RUNNING day is the rate while the line is on this product, not an average that includes the days it sits idle.
- Read the maximum inventory, not just the run size. It is always lower, because you are shipping out of the batch while it is still being made, and it is the number your warehouse has to hold.
- Check the share of the line this product takes. Above about 90% there is no slack left for a breakdown or a rush order, and the lot-size answer stops being the interesting one.
- Round the answer to something the shop can actually schedule. The cost curve is flat near the bottom: being 25% off the ideal run costs about 2.5%, so a full shift or a whole pallet is worth more than the exact figure.
What each term means
- EPQ
- Economic production quantity: the run length that balances setup cost against holding cost when the batch is produced gradually rather than delivered at once.
- Setup cost
- Everything one changeover costs: labour, scrap, lost line time, and the first-run quality risk. Independent of how long the run then is, which is what makes long runs cheap per unit.
- Maximum inventory
- The peak stock level, reached the moment production stops. Always below the run size, by exactly the share you sold while making it.
- Production rate vs usage rate
- How fast you can make it against how fast it leaves. Their ratio is the whole difference between this model and an order quantity; when usage catches production, no run length works.
- Cycle length
- Days from the start of one run to the start of the next: the running days plus the days you live off the stock it built.
Educational disclaimer: Outputs are simplified educational estimates built from the numbers you enter — they are not financial, legal, tax, or investment advice, and real decisions deserve verified figures and qualified professionals.