What is stockout?

Stockout is when a product is out of stock. It can be caused by many factors, such as a supplier's inability to deliver the products on time or the demand for the product being higher than expected.

What is an example of a stockout?

A stockout is a situation where you have a shortage of inventory. This can happen for various reasons, such as supplier issues, equipment failure, or theft. Stockouts are frustrating because they cause your business to lose money and can be difficult to predict and prevent.

What causes stockouts?

  • A product may be out of stock because the supplier has run out of stock and needs more to deliver.
  • A product may be out of stock because its manufacturer has discontinued it or is no longer being produced.
  • You might find that an item is sold out because it was oversold, and now it's on backorder, meaning that customers who place orders for these items will have to wait until they are restocked before receiving them (in some cases, this could take weeks or months).

What are some tips to prevent stockouts?

  • Keep an inventory of your products and parts using a CMMS or supply chain management software.
  • Set up a stockout prevention plan and get the right equipment for your business, like a barcode scanner or RFID reader.
  • Get the right supplies from suppliers who can provide you with the right products and services at competitive prices and high-quality standards.

Read our best practices to improve your inventory management

What is stockout cost?

Stockout cost is the sum of all the expenses incurred due to stockouts. These costs can be divided into three categories:

  • Lost sales: Means lost revenue from customers who would have bought your products if you had them in stock.
  • Customer loyalty: Refers to customers who might have stayed loyal and continued buying your products if they'd had a good experience with them (e.g., by using them in their homes or offices) but now are less inclined to do so because of their poor experiences with out-of-stock products.
  • Employee morale and productivity: Employees tend to be less productive when they're frustrated by having too much work piling up while some parts are unavailable; it also affects employee morale when they see no end in sight for this situation.

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How do stockouts impact maintenance teams?

Stockouts can have several negative consequences for maintenance teams. Here are a few reasons why stockout is considered detrimental:

  1. Downtime and delays: When a maintenance team cannot access the necessary spare parts or supplies due to stockout, it can lead to equipment downtime and delays in repairs or maintenance tasks. This can disrupt operations, prolong equipment outages, and decrease productivity.
  2. Increased costs: Stockout can lead to increased costs in several ways. Firstly, if urgent orders for spare parts or supplies need to be expedited or sourced from alternative suppliers, it can incur additional expenses. Secondly, the longer the equipment remains non-functional due to stockout, the more significant the potential impact on production or service delivery, resulting in financial losses.
  3. Reduced efficiency: Maintenance teams rely on readily available tools, equipment, and spare parts to perform their tasks efficiently. Stockout forces them to delay the work or find temporary workarounds, which may not be optimal. Inadequate or improper replacements can result in subpar repairs, compromised performance, and the need for rework.
  4. Employee morale and frustration: Repeated stockouts can lead to frustration and demotivation. Maintenance team members may feel frustrated when they cannot carry out their responsibilities effectively due to a lack of necessary resources. It can also contribute to a perception of inefficiency or inadequate support from management.
  5. Safety concerns: Maintenance activities ensure workplace safety in specific industries. Stockout can hinder faulty equipment's prompt repair or replace, potentially compromising safety standards. This can increase the risk of accidents, injuries, or other safety-related incidents.

Stockout can cost a lot to your business, so it's essential to prevent these costs

Stockouts cost money for businesses because they often result in lost sales or dissatisfied customers who will return when their problem has been resolved (which could take weeks). In addition to losing revenue from those customers who couldn't buy anything during this time, you also have teams and businesses who can only be productive when parts become available. This is especially important when looking at maintenance teams, as they need their part inventory on hand and available to complete their scheduled work.

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