Stockout Frequency
A stock out, as the term suggests, occurs when a firm has no product available to fulfill customer demand. Stockout frequency refers to the probability that a firm will not have inventory available to meet a customer order. For example, studies of retail stores across many industries consistently find that stockouts about 8 percent. For items that are specifically begin promoted, stockouts average about 16 percent! It is important to note, however, that a stockout does not actually occur until a customer desires a product. The aggregation of all stockouts across all product is an indicator of how well a firm is positioned to provide basic service commitments in product availability. While it does not consider that some products maybe more critical in terms of availability than others, it is the starting point in thinking about inventory availability.