How to use this calculator
- Enter or choose average daily demand.
- Enter or choose days out of stock.
- Enter or choose share of demand lost (not backordered).
- Enter or choose profit per unit sold.
- Enter or choose extra cost per backordered unit.
- The cost of the stockout updates as you type. Use Copy result or Share to keep it.
Method
Units short = Demand × Days; Lost profit = Units short × Lost% × Unit profit; Backorder cost = Units short × (1 − Lost%) × Extra cost; Total = Lost profit + Backorder cost + Other
- Lost%
- share of customers who buy elsewhere instead of waiting
- Unit profit
- contribution per unit sold
Worked example
- Units short = 40 × 5 = 200.
- Lost: 200 × 60% = 120 units × 12 = 1,440.
- Backordered: 80 units × 3 = 240.
- Total = 1,440 + 240 = 1,680, or 336 a day.
Five days out of stock costs about 1,680: 1,440 of lost profit and 240 of backorder handling.
What the result means
Compare the cost per day with the carrying cost of the extra safety stock that would have prevented it. If a week of extra stock costs less to hold than one day out of stock, hold more.
Assumptions and limits
- Demand during the stockout equals normal average demand.
- Customers who leave do not return later for this purchase.
- Longer-term effects, such as customers who never come back or lower marketplace ranking, are only captured if you add them as other costs.
Questions
How do I estimate the share of sales lost?
Look at past stockouts: compare backorders taken with normal demand for the same period. The gap is roughly the lost share.
Why use profit rather than revenue?
If the sale had happened you would also have paid for the goods, so only the margin is actually lost.