The stock-out rate says how often you had nothing to sell, and it's worked out two ways. By item: stock-out rate = items at zero ÷ items checked. By demand: stock-out rate = order lines that couldn't be filled from stock ÷ all order lines. The first says how often the shelf was empty; the second says how often a customer noticed. A cleaning products maker that checks twelve products weekly for eight weeks finds one at zero 7 times in 96 checks, 7.3%, and 11 of 180 order lines short, 6.1%, which cost $1,100 of sales. Below is each formula, the eight weeks, what the stock-outs had in common, and a free calculator.
The short version
- By item: items at zero ÷ items checked, at each check or over a period.
- By demand: order lines short ÷ all order lines.
- Sales lost = units short × price; the cost is often more, if the customer goes elsewhere.
- Look at which items run out and why: they often share a cause.
- Stock-outs come from reorder points set too low or reorders placed too late.
- TaroStack warns when stock falls below its reorder point and lists what to order in days of cover. More below.
The formulas
| Stock-out rate | Formula | What it says |
|---|---|---|
| By item | Items at zero ÷ items checked | How often the shelf was empty |
| By demand | Order lines short ÷ order lines | How often a customer was let down |
| Days out | Days each item was at zero ÷ (items × days) | How long the shelf stayed empty |
Sales lost to stock-outs = units short × the price they'd have sold for. It's the floor of the cost: a co-op that can't get your laundry powder this week may stock someone else's next week.
An example: a cleaning products maker's eight weeks
Blue Door Cleaning Co., a made-up maker of laundry powder, cleaners and dish soap bars in Minneapolis, Minnesota, I use in these examples, checks twelve products every Monday from September 7 to October 26:
| Item | Weeks at zero | Order lines | Lines short | Units short | Sales lost |
|---|---|---|---|---|---|
| Bulk laundry powder, 25 lb, for refill shops | 3 | 9 | 4 | 8 | $560 |
| Toilet tabs, jar of 30 | 2 | 12 | 4 | 48 | $384 |
| All-purpose refill, 64 oz | 1 | 10 | 2 | 12 | $108 |
| Stain stick | 1 | 11 | 1 | 12 | $48 |
| Eight other products | 0 | 138 | 0 | 0 | $0 |
| All twelve | 7 of 96 checks | 180 | 11 | $1,100 |
The stock-out rate by item is 7 of 96, 7.3%: one product at zero at almost every check, never the same one for long. By order line it's 11 of 180, 6.1%. The four that ran out share a cause: they're the products ordered in big, uneven amounts, or made in big batches that come round once a month. The bulk 25-pound bags go to refill shops that order two at a time, so a reorder point that suits the 2-pound box empties the shelf in one order. The stain stick fell a little every week for eight weeks until it hit zero, which is a reorder nobody placed. How to set a reorder point that allows for uneven orders is in reorder point example, and how much cushion to keep in safety stock formula.
What a good stock-out rate is
As low as the cost of holding more stock allows. Every item at 0% means a lot of money on the shelves; a few stock-outs on slow, cheap items can be the right trade, while a stock-out on the best seller rarely is. Rank items by how much they sell and set tighter targets for the top ones. A supplier or a batch that arrives late causes stock-outs too; how to measure a real lead time is in lead time calculation formula.
Get the calculator
Download the stock-out rate calculator. Two sheets: weekly checks, one line for each item with what was on hand at each check, where weeks out, each week's stock-out rate and the period's rate fill in; and order lines, where you type each item's order lines, lines short, units short and price, and the sales lost and the stock-out rate by order line fill in. It's an ordinary Excel file with no macros, and it works in Google Sheets, LibreOffice and Numbers.
Where this stops working
A weekly check catches a stock-out on Monday that started on Wednesday, and misses one that started and ended between checks. And by the time the sheet says the stain stick is at zero, the co-op has already asked for it.
How TaroStack does it
TaroStack warns when stock falls below its reorder point and lists what to order in days of cover.
A warning before zero. Stock below its reorder point raises an alert, so the stain stick's slow fall is noticed weeks before it's empty, not on the Monday it's gone.
Reorder points from how stock moves. TaroStack suggests reorder points from how each item actually moves, so the bulk bags' reorder point comes from how they really sell, not from the 2-pound box's, and the reorder list puts what will run out first at the top, in days of cover.
Short before it ships. A sales order shows whether there's enough on hand while you're typing it, and "what could I make right now" says whether a batch of toilet tabs can be made from what's on the shelf.
| The job | Spreadsheet | In TaroStack |
|---|---|---|
| An item about to run out | Found at the weekly check | Alert below the reorder point |
| Reorder points for uneven orders | Guessed | Suggested from how stock moves |
| What to make first | Look down the column | Reorder list in days of cover |
| Can this order be filled? | Found when packing | Shown as you take the order |
Reorder lists, alerts and sales orders are on every plan, from $49 a month. The first 30 days are free, with no credit card. If you'd like a hand setting up, ask, and we'll do it with you.