Finance Tools
Inventory Stockpiling Savings Calculator
Estimate whether stockpiling inventory before a price increase saves money after accounting for carrying costs like storage, insurance, and cost of capital.
Decide if stockpiling inventory before a price increase saves money after accounting for carrying costs (capital, storage, insurance).
Current purchase price per unit.
Use negative for expected price declines.
Extra units you buy early.
How long you’ll hold the extra inventory.
Opportunity cost of cash tied up in inventory.
Warehousing, shrinkage, insurance, etc.
Total carrying rate: 18.00%
Inventory value
Pre-buy inventory value: $384,000
Savings vs costs
Gross savings: +$38,400
Holding cost: -$23,040
Net savings: +$15,360
Break-even price increase
Break-even increase (for this holding period): 6.00%
If the expected price increase is above this, stockpiling tends to save money (ignoring other risks).
Tip: If availability risk matters, stockpiling can be worth it even if net savings is small.
How it works
- Gross savings = units × unit price × expected increase%.
- Holding cost ≈ inventory value × (annual carry rate) × (months/12).
- Net savings = gross savings − holding cost.
- Break-even increase% = holding cost ÷ inventory value.
FAQ
What about spoilage or obsolescence?
Add an extra percentage into storage/insurance to approximate shrinkage or write-down risk.
What if I can’t store that much?
Lower pre-buy units or increase storage cost to reflect capacity constraints.
How to use this inventory stockpiling savings calculator
- Enter current unit price, expected price increase, and how many units you plan to pre-buy.
- Enter how long you will hold the extra inventory (months).
- Enter carrying cost rates (annual %), including cost of capital and storage/insurance.
- Review gross savings from avoiding the price increase and net savings after carrying costs.
Example
You plan to pre-buy 120,000 units at $3.20/unit before a 10% supplier increase. You’ll hold them 4 months. Annual carrying cost is 18%.
- Gross savings = units × price × increase% = 120,000 × 3.20 × 10% = 38,400
- Inventory value = 120,000 × 3.20 = 384,000
- Holding cost ≈ inventory value × (18% × 4/12) = 23,040
- Net savings ≈ gross savings − holding cost
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