Optimal Stocking Level for capital intensive service parts is the stocking level at which if we were to stock one more unit the marginal cost of that unit would exceed the marginal profit expected from a sale of the unit.

Example

We are stocking Caterpillar Bulldozer belts and we have determined that the marginal profit gained from moving from a stocking level of 8 belts to 9 belts is $3000.

However the inventory and operation cost of doing so will be $3300, thus the cost is greater than the profit.

The Optimal Stocking Level is 8 units.