Posted in Operations and Supply Chain Terms, Total Reads: 1121

Definition: Stockout

A Stockout or out of stock is event where the product is exhausted. It generally refers to the Stockouts experienced in retail stores for FMCG products. The losses resulting from Stockouts are referred to as Stockout costs.

Due to the recent advances in technology like Radio frequency identification (RFID), there is a better coordination between the retailer and the supplier resulting to a decrease in the average Stockout over the past decade. The current average Stockout rate is at 8.3%.

Suppliers generally complain that the Stockouts happen due to the inefficiency of the retailer. It means that the upstream supply chain is generally not the reason for Stockouts but the replenishment efficiency of a retailer. There are many causes of a Stockout. Faulty demand estimation can be a reason for the Stockout. An inefficient supply chain can be the cause of a Stockout. A cash crunch at the end of the retailer may also be a reason of inability to stock enough products.

The response of a shopper to Stockout may vary from product to product, retailer to retailer and shopper to shopper. In case, a shopper is loyal to the product which is stocked out, he will go to another shop to buy or will buy later from the same shop. If he is not very loyal, he will buy some other bran from the same category from the same shop.

Hence, this concludes the definition of Stockout along with its overview.


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