Stockout

A stockout (or out-of-stock situation) occurs when a product is unavailable because inventory has run out. Stockouts lead to lost sales, disappointed customers, and can damage brand reputation if they happen frequently.

Impact of Stockouts

Customer Impact

• Cannot purchase desired item
• May go to competitor
• Negative experience
• Lost trust
• Bad reviews

Business Impact

Direct Costs:
- Lost sale revenue
- Expedited replenishment
- Emergency shipping costs

Indirect Costs:
- Customer lifetime value loss
- Brand reputation damage
- Marketplace ranking drops
- Recovery marketing costs

Stockout Causes

Demand-Side

Supply-Side

Planning Issues

Measuring Stockouts

Key Metrics

Stockout Rate Calculation

500 SKUs in catalog
15 SKUs currently out of stock

Stockout Rate = 15/500 = 3%

Industry benchmark: <2% is good

Stockout Prevention

Inventory Strategies

1. Safety stock - Buffer inventory
2. Reorder points - Trigger replenishment
3. Forecasting - Predict demand
4. Supplier relationships - Reliable supply
5. Inventory visibility - Know what you have

Prevention Checklist

□ Accurate inventory counts
□ Proper safety stock levels
□ Early reorder triggers
□ Backup suppliers identified
□ Demand forecasting in place
□ Regular inventory audits
□ Real-time inventory tracking

Responding to Stockouts

Immediate Actions

1. Communicate with customers
2. Offer alternatives
3. Enable backorder option
4. Expedite replenishment
5. Adjust marketing/promotions

Customer Communication

Good:
"This item is temporarily out of stock.
Expected back: Feb 15. Pre-order now
and we'll ship as soon as it arrives."

Bad:
"Out of Stock" (no info)

Stockout vs. Backorder

Backorder as Solution

Stockout impact:
- Sale lost
- Customer goes elsewhere

With backorder enabled:
- Customer places order
- Waits for restock
- Sale captured

Stockout Costs

Direct Cost Example

Product sells for $50
Out of stock for 7 days
Normal sales: 20/day

Lost sales: 20 × 7 = 140 units
Lost revenue: 140 × $50 = $7,000

Hidden Costs

• 40% of customers buy elsewhere
• 30% may not return
• Negative reviews
• Search ranking drops
• Ad spend wasted

Technology for Preventing Stockouts

Inventory Management Tools

• Real-time stock tracking
• Automated reorder alerts
• Demand forecasting
• Multi-channel sync
• Low stock notifications

Advanced Capabilities

• AI demand prediction
• Automated purchasing
• Supplier integration
• Seasonal adjustments
• Promotion planning

Stockout Recovery

Steps to Recover

1. Investigate cause - Why did this happen?
2. Restock quickly - Expedite if needed
3. Notify waitlist - Contact interested customers
4. Adjust systems - Prevent recurrence
5. Review metrics - Track improvement

Preventing Future Stockouts

Root cause: Reorder point too low

Action:
1. Increase reorder point
2. Add safety stock
3. Monitor lead times
4. Review forecasts monthly

Industry Stockout Rates

Benchmarks

E-Commerce Considerations

• Higher customer expectations
• Immediate visibility online
• Competition one click away
• Reviews impact heavily

Best Practices

Strategic

1. Prioritize fast movers
2. ABC inventory analysis
3. Multiple suppliers
4. Demand planning
5. Safety stock by SKU

Operational

1. Accurate counts
2. Timely reordering
3. Good supplier communication
4. Real-time tracking
5. Regular audits