Stockouts

A stockout occurs when the inventory level of a product is insufficient to meet immediate demand, resulting in unfilled orders or lost sales. Stockouts can occur at any point in the supply chain and may involve finished goods held by retailers, components in manufacturing, or raw materials.

Causes include inaccurate demand forecasting, limited or unreliable supplier lead times, delays in replenishment, limited safety stock, seasonality, promotions, and supply chain disruptions such as transportation bottlenecks or supplier insolvency.

Impacts: for retailers, stockouts lead to missed sales and reduced customer satisfaction; for manufacturers, production lines may halt; for healthcare and critical sectors, stockouts can compromise safety and care. Substitutions may raise costs or harm revenue; markdowns and backorders can affect profitability and brand loyalty.

Measurement: common metrics include stockout rate (proportion of SKUs or periods with stockouts), stockout duration, service level (fill rate), and backorder levels. Monitoring requires real-time inventory data and demand forecasts, and often uses software like ERP and inventory optimization tools.

Mitigation: improved forecasting accuracy, higher or more targeted safety stock, better inventory positioning, reorder point optimization, supplier diversification, vendor-managed inventory, collaborative planning with suppliers, and demand shaping through pricing or promotions. In manufacturing, lean practices and just-in-time approaches reduce inventory risk but increase exposure to disruption; in healthcare, prioritization and parallel sourcing are common.