Inventory operations
Stockout
Demand arriving at an empty shelf.
Where it lives in nouz
Inventory, where cover falls below the lead time.
A stockout is demand arriving with nothing to sell. Its cost never appears in any report, because an order that could not be placed leaves no record, which makes it the one significant ecommerce loss that has to be estimated deliberately or ignored entirely.
The visible loss is the margin those orders would have contributed. The invisible ones are usually larger: advertising that ran against an unavailable product, the customer who bought elsewhere and stayed there, and the search ranking a product loses while it is out.
Estimating it is straightforward enough to be worth doing. Take the product's velocity before the stockout, multiply by the days it was unavailable, and multiply that by contribution per unit. The figure is an estimate, and it is far closer to the truth than the zero a report will otherwise show.
Prevention lives upstream, in cover and reorder points rather than in expediting. By the time a shelf is empty the only remaining choices are air freight and apology, both of which cost more than the safety cover that would have avoided the situation.
Related terms