Stockouts, also known as out-of-stocks, occur when a specific item or product runs out of inventory, making the purchase not possible. In other words, it happens when demand is higher than the inventory available.
According to an analysis made by Adobe, stockouts were up 250% in October 2021 and shoppers saw over 2 billion out-of-stock messages online in that period.
Stockouts can be caused by several factors, such as inadequate planning and forecasting, higher than expected demand, supply chain inefficiencies, and production problems. In addition, stockout issues can also arise from inaccurate inventory tracking and lack of visibility into the entire supply chain.
There are many different reasons that can cause stockouts, such as:
Stockout rate can be calculated by subtracting the inventory of a particular item from the amount of orders placed for that item. This calculation gives you an accurate estimate of the number of stockouts that the business has experienced.
On the other hand, to calculate stockout costs, use the following formula:
SC = (D x AS x P)
SC = Cost of stockout
D = Number of Days Out of Stock
AS = Average Units Sold Per Day
P = Price Per Unit or Profit Per Unit
Other factors that affect the cost of a stockout include customer service costs associated with resolving stockout issues and any additional costs incurred from dealing with suppliers.
To prevent stockouts and avoid losing customers and revenue, retailers can:
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