Stockout Rate Calculator
What is Stockout Rate?
The Stockout Rate is a critical inventory management metric that measures the frequency at which inventory items are unavailable when requested by a customer. A high stockout rate indicates inefficiencies in supply chain management, leading to lost revenue, diminished customer loyalty, and potential damage to your brand reputation.
How to Calculate Stockout Rate
There are two primary ways to calculate this metric, depending on whether you are looking at physical inventory counts or financial impact:
1. SKU Count Method
This formula is best for warehouse managers focusing on operational efficiency. It measures the percentage of distinct products (SKUs) that have zero inventory available.
Formula: (Number of SKUs Out of Stock / Total Number of Active SKUs) × 100
Example: If you sell 2,000 different products and 100 of them are currently out of stock, your stockout rate is (100 / 2,000) × 100 = 5%.
2. Lost Revenue Method
This approach is more useful for financial planning and sales analysis. It estimates the percentage of demand that could not be fulfilled.
Formula: (Estimated Lost Sales / Total Potential Sales) × 100
Note: Total Potential Sales is calculated as Actual Sales + Estimated Lost Sales.
Why Monitoring This Metric Matters
- Revenue Protection: Every stockout is a direct loss of immediate sales.
- Customer Retention: 30% of consumers feel that stockouts hurt their shopping experience, often driving them to competitors.
- Inventory Optimization: Identifying which items frequently stock out allows for better forecasting and reorder point adjustments.
What is a Good Stockout Rate?
While 0% is the theoretical ideal, it is often too costly to maintain due to storage and carrying costs. For most retailers, a stockout rate between 2% and 8% is considered acceptable, while anything above 10% requires immediate intervention. Conversely, the Service Level (Availability Rate) should ideally be between 92% and 98%.