How to use these calculators
Holding too much inventory consumes working capital, while running out can jeopardize customer orders. Use an annual holding-rate assumption to estimate carrying expense, and a separate demand-loss estimate to understand the opportunity cost of stockouts. These metrics use different units and must not be directly equated without normalizing the period.
A worked scenario
Estimated carrying cost: $1,320/year; contribution at risk in the stockout scenario: $1,400.
The stockout number is a scenario risk, not an annualized certainty. Compare demand and lead-time distributions.
How to plan this decision
- Normalize periods
Use an annual holding cost but forecast stockout scenarios separately.
- Validate demand
Exclude out-of-stock days from naive sales averages when estimating demand.
- Set a buffer
Use lead-time uncertainty and desired service level, not holding cost alone.
Read the detailed worked guide →
Start with the formula
Estimate the sales volume needed to cover fixed and variable costs, then stress-test the assumptions.
Read Break-Even Analysis for a New Product or Service →