In the context of inventory costs, stockout costs can reflect backorders or service interruptions for external customers.
Inventory cost is the capital lost from inventory that customers can no longer purchase. If a customer cannot buy something because it is out of stock, the company suffers a loss. Out of stock occurs when we run out of stock of a particular item. Out-of-stocks can occur anywhere in the supply chain, but they have the greatest impact on retail shelves and profits when they occur when customers are about to buy. Inventory levels occur when a customer's order for a product exceeds the amount of inventory on hand. This situation occurs when demand is higher than expected and the amount of normal and safety stock is too low to fulfill all orders. Missing sales result in lost sales opportunities. Out-of-stock cost refers to the total cost of out-of-stock, including lost revenue. Out of stock can hurt your business, especially if the buyer is a first-time buyer.
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