Business
Inventory Scenario Calculator
Compare baseline holding cost with a named demand-and-inventory scenario, then keep carrying cost and estimated stockout contribution loss separate.
Baseline annual holding cost-
Scenario monthly demand-
Scenario average inventory-
Scenario annual holding cost-
Scenario annual unmet units-
Scenario contribution lost to stockouts-
Scenario holding and stockout cost-
Scenario cost minus baseline holding cost-
Decision view
Inventory holding-versus-stockout tradeoff
Inventory holding-versus-stockout tradeoffScenario holding cost and estimated stockout contribution loss reconcile to the complete scenario cost.
Exact scenario comparisonScenario unmet-demand share (%) changes while all other entered assumptions remain constant.
| Scenario unmet-demand share (%) | Baseline annual holding cost | Scenario monthly demand | Scenario average inventory | Scenario annual holding cost | Scenario annual unmet units | Scenario contribution lost to stockouts | Scenario holding and stockout cost | Scenario cost minus baseline holding cost |
|---|
How to use Inventory Scenario Calculator
- Anchor the baseline to a consistent average-inventory period.
- Enter a scenario demand change separately from inventory change.
- Review holding savings and stockout loss before accepting the net difference.
Calculator guide
Understanding Inventory Scenario Calculator
An inventory reduction can release carrying cost while simultaneously increasing lost contribution from unmet demand.
Calculation method
How the calculation works
Compare a named demand-and-inventory scenario with baseline holding cost, keeping scenario holding cost and estimated stockout contribution loss separate. Adjust demand and average inventory independently, calculate annual holding cost from landed value, estimate unmet units from the service shortfall, and value those units at entered contribution.
Inventory decision
Find the service-cost tradeoff
The lowest inventory is not automatically the lowest economic cost.
Worked situations
Practical examples
- A lower average inventory reduces annual carrying cost.
- A 2% shortfall applies to annual scenario demand.
- Lost sales are valued at contribution per unit, not selling price.
Better inputs
Useful tips
- Run several service-shortfall assumptions.
- Use lead-time and demand variability data.
- Track obsolescence outside the simplified model.
Before relying on the result
Limitations and common mistakes
- Reorder logic, lead time, safety stock, seasonality, substitution, backorders, obsolescence, quantity discounts, and cash timing are excluded.
- The shortfall percentage is an entered scenario.
- Contribution loss is not necessarily permanent customer loss.
Reference
Key terms
- Holding rate
- Annual carrying-cost percentage applied to inventory value.
- Service shortfall
- Entered share of scenario demand not fulfilled.
- Stockout contribution loss
- Unmet units multiplied by contribution per unit.
- Scenario total cost
- Scenario holding cost plus estimated stockout loss.
Important note
Calculated from the entered values using the displayed accounting method. Reconcile material decisions with source records and applicable accounting policy.
Frequently asked questions
Why compare with baseline holding cost only?
The baseline represents the currently entered inventory carrying burden; the scenario adds an explicit shortfall loss.
Are backorders included?
No.
Does inventory change affect demand automatically?
No.
Is stockout cost revenue?
No, it is entered lost contribution.