Poor ordering decisions drain restaurant profits through spoilage, tied-up capital, and excessive delivery fees. Finding the sweet spot between ordering too much and too little can save you hundreds monthly. The optimal order quantity calculation gives you that balance.
What is the optimal order quantity?
The optimal order quantity represents the amount of an ingredient you should order at once to minimize your total costs. These costs break down into three categories:
- Ordering costs: time, administration, delivery costs
- Inventory costs: storage, spoilage, tied-up capital
- Shortage costs: lost sales, emergency deliveries
Order frequently and you'll reduce inventory costs but increase ordering expenses. Order in bulk and the opposite happens. The optimal quantity hits that cost-minimizing middle ground.
The EOQ formula (Economic Order Quantity)
For ingredients you use consistently, the EOQ formula works perfectly:
EOQ = √(2 × D × S) / H
- D = Annual consumption (kg/units per year)
- S = Ordering costs per order (€)
- H = Inventory costs per unit per year (€)
💡 Example:
A restaurant uses 2,400 kg of beef annually (200 kg monthly):
- Annual consumption (D): 2,400 kg
- Ordering costs per order (S): €25 (time + administration)
- Inventory costs per kg per year (H): €3 (15% of €20/kg)
EOQ = √(2 × 2,400 × 25) / 3 = √40,000 = 200 kg
Result: 200 kg per order (once monthly)
Calculating inventory costs
Inventory costs combine several elements you need to track separately:
- Capital costs: 5-8% of purchase value annually
- Storage costs: cooling, freezing, space rental
- Spoilage and loss: 2-10% depending on product type
- Insurance and administration: 1-2%
💡 Example inventory costs:
Beef at €20/kg:
- Capital costs: 6% × €20 = €1.20
- Cooling costs: €0.50 per kg annually
- Spoilage: 5% × €20 = €1.00
- Other expenses: €0.30
Total inventory costs: €3.00 per kg annually
Determining ordering costs
Ordering costs include all expenses you incur per order, regardless of quantity:
- Time investment: placing order, receiving, checking quality
- Administration: processing invoices, payment processing
- Delivery costs: fixed fees per delivery
⚠️ Note:
Only count fixed costs per order, not quantity-dependent expenses. Transport costs calculated per kg belong in the purchase price.
Practical adjustments
The EOQ formula provides a theoretical optimum, but real-world factors require adjustments:
- Minimum orders: supplier requirements for minimum quantities
- Shelf life: fresh products need shorter storage periods
- Seasonal variation: consumption fluctuates throughout the year
- Storage limitations: physical cooling and freezing capacity
- Cash flow concerns: avoiding excessive capital tie-up
I've seen restaurants ignore shelf life constraints - a mistake that costs the average restaurant EUR 200-400 per month in spoiled inventory. Always factor in perishability limits.
💡 Practical example:
EOQ calculation suggests 200 kg beef, but:
- Supplier minimum: 150 kg
- Cooling capacity: max 250 kg
- Shelf life: 14 days maximum
- Daily usage: 200 kg monthly = 7 kg daily
200 kg ÷ 7 kg daily = 28 days inventory
Better approach: 100 kg every 2 weeks (within shelf life)
ABC analysis for priority
Not every ingredient deserves equal attention. Apply ABC analysis:
- A-products (80% value): detailed EOQ calculations
- B-products (15% value): simplified calculations
- C-products (5% value): generous inventory, less frequent orders
Spend your time on expensive ingredients. For spices and seasonings, optimal order quantity matters far less than for meat and seafood.
Technology and ordering
Systems like KitchenNmbrs track consumption patterns per ingredient and identify trends. This data improves your annual consumption estimates and makes EOQ calculations more accurate.
You'll also spot which ingredients represent your biggest expenses (A-products) and where better purchasing delivers maximum profit impact.
How do you calculate the optimal order quantity? (step by step)
Determine your annual consumption per ingredient
Look at your consumption from the last 3-6 months and calculate this for a full year. Watch out for seasonal variations and growth of your business.
Calculate your ordering costs per order
Add up: time for ordering (€ per hour × hours), administration, fixed delivery costs. Don't divide this by the number of products - these are costs per order.
Determine your inventory costs per unit
Add together capital costs (6% of purchase price), storage costs, spoilage and administration. This gives you inventory costs per kg/unit per year.
Apply the EOQ formula
EOQ = √(2 × annual consumption × ordering costs) / inventory costs. This gives you the theoretical optimum in kg or units per order.
Correct for practical limitations
Check supplier minimum order, shelf life, storage space and cash flow. Adjust your order quantity within these limits.
✨ Pro tip
Calculate EOQ for your 3 highest-cost ingredients first, then expand to cover 80% of your purchasing value within 30 days. These deliver immediate savings and build your confidence with the method.
Calculate this yourself?
In the KitchenNmbrs app you can do this in just a few clicks. 7 days free, no credit card.
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Frequently asked questions
Do I need to calculate EOQ for every ingredient?
Focus on A-products representing 80% of your purchasing value. For spices and small-cost ingredients, maintaining generous inventory often makes more sense than complex calculations.
What if my supplier has a minimum order requirement?
If the minimum exceeds your EOQ, order the minimum quantity. If it's lower, stick with your calculated EOQ or round up to practical packaging units.
How do I handle seasonal ingredients with fluctuating demand?
Calculate separate EOQs for peak and off-seasons based on historical consumption data. Update quarterly and adjust immediately when demand patterns shift significantly.
📚 Sources consulted
- EU Verordening 852/2004 — Levensmiddelenhygiëne (2004) — Official source
- EU Verordening 853/2004 — Hygiënevoorschriften voor levensmiddelen van dierlijke oorsprong (2004) — Official source
- EU Verordening 1169/2011 — Voedselinformatie aan consumenten (2011) — Official source
- NVWA — Hygiënecode voor de horeca (2024) — Official source
- NVWA — Allergenen in voedsel (2024) — Official source
- Codex Alimentarius — International Food Standards (2024) — Official source
- FSA — Safer food, better business (HACCP) (2024) — Official source
- BVL — Lebensmittelhygiene (HACCP) (2024) — Official source
- Warenwetbesluit Bereiding en behandeling van levensmiddelen (2024) — Official source
- WHO — Foodborne diseases estimates (2024) — Official source
Food Standards Agency (FSA) — https://www.food.gov.uk
The HACCP standards shown in this application are for informational purposes only. KitchenNmbrs does not guarantee that displayed values are current or complete. Always consult the FSA or your local authority for the latest regulations.
Written by
Jeffrey Smit
Founder & CEO of KitchenNmbrs
Jeffrey Smit built KitchenNmbrs from 8 years of hands-on experience as kitchen manager at 1NUL8 Group in Rotterdam. His mission: give every restaurant owner control over food cost.
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