Calculation of Stockout Rate
The following formula can be used to calculate the stockout rate:
Where,
Number of Stockouts determine how many times in a specific time frame there were stockouts overall. This could apply to a single product, an SKU, or all goods combined.
Total Number of Stockout Opportunities is the total number of times a customer tries to buy the item or items in the same amount of time.
Example:
If there were 20 stockouts out of 500 possible stockout opportunities:
Stockout Rate =
Stockout Rate = 4%
This indicates that within the given time frame, there was a 4% stockout for a specific item.
Stockout: Meaning, Calculation, Impact and Examples
A Stockout occurs when a company runs out of a particular good or item. This indicates that the product is unavailable and cannot be purchased by customers. Stockouts happen when a product’s supply cannot keep up with demand or when inventory control fails to replenish supplies promptly. Stockouts can cause a company’s reputation to suffer, missed sales, and disgruntled customers. Effective inventory management and precise forecasting are essential to prevent the detrimental consequences of stockouts on operations and customer satisfaction.
Key Takeaways:
- Stockouts occur when companies run out of merchandise, which causes them to lose revenue and displeased clients.
- Stockout Rate = (Number of Stockouts / Total Number of Stockout Opportunities) * 100%
- To avoid stockouts and preserve client confidence, companies must efficiently manage their inventory and determine demand.
- Stockouts may have long-term detrimental repercussions, including diminished earnings and damage to a company’s brand.
- Businesses should put measures like planning for safety stock and diversifying their suppliers into practice to prevent stockouts and guarantee smooth operations.
Table of Content
- Causes of Stockouts
- Calculation of Stockout Rate
- What is Stockout Costs?
- Impact of Stockouts on Business
- How can Retailers avoid Running Out of Stock?
- Examples of Stockout
- Conclusion
- Stockout – FAQs