Inventory
Stockout cost.
Enter your daily demand, days out of stock and what happens to the customers who come for it. See the margin each stockout costs you.
Stockout cost = margin on lost sales + margin given up on substitutes + any future profit lost. Running out of a $30.00 item with $18.00 cost for 6 days at 20 a day costs $666.00 when 40% walk away and 25% buy a lower-margin substitute at $9.00 margin.
Your numbers
Result
Worked example
An item sells 20 a day at $30.00 with a $18.00 variable cost, so the margin is $12.00 a unit. It is out of stock for 6 days, so 120 units of demand go unmet. Of those customers, 25% (30 units) buy a substitute that earns $9.00 instead of $12.00, a gap of $90.00. Another 35% (42 units) wait and buy later, which costs nothing here. The remaining 40% (48 units, $1,440.00 of sales) walk away, losing $576.00 of margin. One stockout therefore costs $666.00, $111.00 per day, and four a year come to $2,664.00.
How it works
Customers who find an item out of stock respond in a few ways. Wikipedia's article on stockouts lists them as switching stores, buying a substitute (a different brand, size or category), postponing the purchase, or not buying at all. This calculator groups those into three: substitute, postpone and lost. Switching stores and not buying are both treated as lost.
Cost = lost units x unit margin + substituted units x max(unit margin - substitute margin, 0) + lost units x future profit lost. Postponed sales are assumed to be recovered later with no extra cost; if you expedite or discount to win them back, count that as a lost-margin amount. The split between the three responses is your own estimate: use backorder logs, point-of-sale substitution data or a short customer survey. Stockouts can also hurt loyalty, which is the optional future-profit input.
To decide whether extra safety stock is worth it, compare the per-event cost here, multiplied by how often it would happen, with the yearly carrying cost of the extra stock from the carrying cost calculator.
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Sources
- Stockout - Wikipedia (opened 2026-10-08): the ways shoppers respond to a stockout (switch stores, buy a substitute, postpone, or not buy) and that stockouts cause lost sales and reduce store loyalty.
FAQ
How do I calculate the cost of a stockout?
Multiply the units demanded while out of stock by the share that walk away and by your unit margin, then add the margin gap on customers who take a cheaper-margin substitute and any repeat business you lose. Customers who simply wait cost nothing in this model.
What do shoppers do when an item is out of stock?
According to Wikipedia's article on stockouts, they might switch stores, buy a substitute (brand, size or category switch), postpone the purchase or not buy the item at all.
How do I estimate how many customers walk away?
Use your own data: backorders placed, sales of likely substitutes during the gap, and a quick question at checkout or in an online notification. If you have none, run the calculator at a few percentages to see the range.
Should I use price or margin for lost sales?
Margin. A lost sale costs you the profit on the sale, not the revenue, because you also avoid the cost of the goods. The result also shows the revenue not earned for reference.
How does this connect to safety stock?
Safety stock reduces how often you run out. Compare the stockout cost per event times the events it prevents with the yearly cost of holding that extra stock. The reorder point calculator sizes the safety stock.