Glossary ยท concept
Stockout
An event where an SKU has zero on-hand stock at the moment of customer demand โ the fundamental failure event and primary KPI of inventory policy.
Out of StockOOSShortage EventStock-Out
A stockout is the situation in which on-hand stock for an SKU is zero when a customer demands it. Operationally it resolves into one of two outcomes: (1) lost sale โ the customer switches to another brand or walks away, sacrificing revenue and possibly future loyalty, or (2) backorder โ the customer accepts a wait, deferring the sale. Which behavior dominates depends on category: staples and pharmaceuticals lean to lost sale, while custom furniture or niche B2B parts lean to backorder. OR measures stockouts on three core metrics: stockout probability P(out), fill rate ฮฒ (the share of demand met from stock), and cycle service level ฮฑ (the share of order cycles with no stockout at all). These three are not equivalent: 95% cycle service can coincide with 99% fill rate. Newsvendor (#011), (s,S) policy (#004) and EOQ-with-shortage variants (#093) all encode the stockout cost as bโ (lost-sale unit margin) or bโ (backorder unit-time waiting penalty). For SMBs, stockout cost is notoriously hard to estimate โ it is not a standing accounting line โ and many firms never measure it. A quick proxy: stockout frequency ร average daily sales ร unit margin.
รrnek
A bicycle-parts wholesaler with 2,400 SKUs pulls CRM data and finds 180 SKUs had stockouts in the last 12 months: 540 events, average 4 days each, average part margin 35 TL. Estimated lost-sale cost is roughly 540 ร 4 ร 6 ร 35 = 453,600 TL/year. Lifting the safety-stock service level from 95% to 98% would add about 190,000 TL of carrying cost โ clearly the profitable move.