Turnover and DIO show how well stock moves. But neither one captures the times inventory ran out. Stockout rate fills that gap. It measures the flip side of overstock: how often customers wanted something that simply wasn't there.

How to Calculate Stockout Rate

Stockout Rate = (Number of Stockout Occurrences ÷ Total Demand Occasions) × 100

You can measure this at the order level: how many orders had an out-of-stock item. Or measure it at the SKU level. Track how often a specific item was out of stock when demand existed.

A Worked Example

Say a business had 50 cases where an item was out of stock when a customer wanted to buy it, out of 1,000 total demand occasions. The stockout rate is (50 ÷ 1,000) × 100 = 5%.

What Causes a High Stockout Rate

Frequent stockouts trace back to a handful of causes. Reorder points might be set too low for demand. Demand forecasts might be inaccurate. Suppliers might be unreliable or slow. Or inventory records don't match stock closely enough. That gap can hide a shortage before it happens.

Why Stockout Rate Matters

Every stockout is a missed sale — and maybe a customer who goes elsewhere next time. Tracking stockout rate over time helps you spot whether the problem is getting better or worse. It also shows whether it's focused on certain items or groups.

Balancing Stockout Rate Against Overstock

Driving stockout rate to zero is possible. But it usually means holding far more safety stock than makes sense. Most businesses aim for a stockout rate that's an acceptable trade-off. It should be low enough to protect sales and customer trust. But it shouldn't be so low that carrying costs balloon just to erase every bit of risk.

Key Takeaways

Stockout rate measures how often demand couldn't be met because stock ran short. It's a useful check against overstock metrics. Tracking it helps a business balance having enough stock against holding too much.

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