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What is Stock-Outs?
Stock-Outs refer to the number of times a product is out of stock when it shouldn't be, leading to lost sales and customer dissatisfaction.
How to calculate Stock-Outs?
Stock-Outs = (Total number of times a product is out of stock / Total number of orders)*100
What is the business impact of Stock-Outs?
Frequent stock-outs can lead to lost sales, damage customer relationships, and negatively impact brand reputation.
Industry benchmark for Stock-Outs
Ideally, the stock-out rate should be as close to 0% as possible.
Although in many industries, the average stockout rate is about 8%, and it rises when products are on sale.
How to improve Stock-Outs?
- Improve demand forecasting to estimate the exact inventory requirements.
- Regularly review inventory levels and monitor how it relates to the demand.
- Implement a robust inventory management system.
- Utilize an automated replenishment system based on reorder points and lead times.
- Incorporate a vendor-managed inventory (VMI) system for critical items.
- Implement a real-time tracking system to monitor stock levels accurately.
