A stockout costs more than the sales you cannot make while a product is unavailable. Some customers wait, others buy elsewhere, and recovering supply often needs expedited freight.
Enter your demand, the days out of stock and your assumptions about lost sales. The calculator shows the margin lost and total cost.
Stockout Cost Calculator
Enter your numbers to see the result.
Estimates for planning only. Results depend on the accuracy of the inputs and the assumptions of the standard formula.
The calculation
- Demand during the stockout = daily demand x days out of stock
- Lost units = demand during the stockout x share lost for good
- Lost margin = lost units x margin per unit
- Total cost = lost margin + extra costs
The share lost for good is the key assumption. It depends on product substitutability, customer loyalty and whether backorders are accepted. Check it against past stockouts. The model does not include the long-term effect of customers who do not return, so treat the result as a lower bound.
Worked example
Demand of 200 units a day, 3 days out of stock, 60% of demand lost for good, margin of $12 a unit and $2,000 of extra costs.
- Demand during stockout = 200 x 3 = 600 units
- Lost units = 60% x 600 = 360 units, with 240 units backordered
- Lost margin = 360 x $12 = $4,320
- Total cost = $4,320 + $2,000 = $6,320, or about $2,107 per day out of stock
Using the result
Compare the cost of a stockout with the cost of holding more stock, which you can estimate with the carrying cost calculator. If a stockout is much more expensive than extra inventory, a higher service level and more safety stock are justified.
Rank items by stockout cost to decide where to focus forecasting and replenishment effort. See also our inventory guides.
Common questions
What is included in the cost of a stockout?
Lost margin on sales that do not happen, plus expedited shipping, overtime, credits or discounts for affected customers and any penalties. Long-term loss of customers is harder to measure and is not included here, so the calculated figure is a lower bound.
How is the share of sales lost estimated?
Look at past stockouts: how many orders were cancelled, how many customers waited and how quickly sales recovered. Items with close substitutes lose more, while specialised or contracted items lose less. Try a low and a high value to see how sensitive the total is.
Should the calculation use margin or revenue?
Use margin per unit, meaning price minus variable cost. Revenue overstates the loss because the product cost and other variable costs are not incurred when no sale happens. Fixed costs stay the same either way, so they do not belong in this calculation.
What happens to the backordered units?
They are treated as sales that arrive late, so the calculator charges no lost margin on them. If backorders require discounts, split shipments or extra handling, enter those amounts under extra costs so the total reflects them.
Is the result per item or per order?
Per event for the item and margin you enter. For several products, run one calculation per product or group and add the totals. Use a volume-weighted margin only when the products share the same lost share and days out of stock.