Stockout

Stockout, also spelled stock‑out, refers to a situation in which the demand for a product or material exceeds the available inventory, resulting in an inability to fulfill customer orders or production requirements. In supply chain management, stockouts are considered a form of inventory shortage and can arise from inaccurate demand forecasting, delays in replenishment, production bottlenecks, or disruptions in the supply network.

The impact of stockouts varies across industries. In retail, a stockout may lead to lost sales, reduced customer satisfaction, and a higher likelihood of customers switching to competitors. In manufacturing, it can cause production line stoppages, delayed order fulfillment, and increased operational costs due to overtime or expedited shipping for replacement parts. Service-oriented firms may experience diminished service levels and reputational damage when essential supplies are unavailable.

To mitigate stockout risk, firms employ several strategies. Safety stock—additional inventory held as a buffer—helps absorb demand variability and supply delays. Continuous review and periodic inventory audits improve visibility of stock levels. Advanced forecasting methods, such as moving averages, exponential smoothing, and machine‑learning models, enhance demand predictions. Collaborative planning, forecasting, and replenishment (CPFR) initiatives align suppliers and retailers around shared data.

Performance measurement often includes stockout rate (percentage of orders not fulfilled from inventory) and backorder level. While maintaining higher safety stock reduces stockout incidence, it also increases carrying costs, creating a trade‑off that supply‑chain managers must balance. Effective stockout management thus requires integration of demand forecasting, inventory optimization, and responsive replenishment processes.