A stockout occurs when a requested product is no longer available for sale at the moment the customer wants to buy it. It can affect the shelf, the stockroom or the online store, depending on how the business is organized.
Yet the problem doesn't start when inventory hits zero. By then it is often already too late: the sale may be lost and the customer may turn to another product or a competitor.
The right time to deal with a stockout is therefore before it happens.
Why do stockouts happen?
A stockout can have several causes:
Higher demand than expected
A temporary or lasting increase in sales can deplete inventory faster than planned. A promotion, a local event, the weather or a sudden change in demand can, for example, alter the usual sales pace.
Restocking triggered too late
If the order is placed when the remaining inventory can no longer cover sales until the next delivery, a stockout becomes likely.
A supplier lead time longer than expected
A product can be ordered correctly but still arrive too late. The lead time actually observed is therefore just as important as the theoretical lead time announced by the supplier.
A mismatch between theoretical and actual inventory
The system may show five units when only two are really left. Breakage, theft, receiving errors, unrecorded movements or counting errors can create this inventory discrepancy. A cycle count makes it possible to regularly check the most sensitive items.
Seasonality that wasn't anticipated
Some changes in demand are predictable. An item may sell much faster at certain times of the year. If restocking stays based on a normal period, inventory can become insufficient.
Why a fixed threshold isn't always enough
A rule such as:
“When 10 units are left, I reorder.”
can work for a product whose sales and supplier lead times are very stable. But ten units don't mean the same thing for every item.
If a product sells ten times a day, this inventory covers about one day of sales. If it sells once every two days, the same ten units represent about twenty days.
The inventory level must therefore be considered alongside the sales pace and the time needed to restock.
Minimum stock, safety stock and reorder point
These three notions are related, but they don't mean exactly the same thing.
Minimum stock
In a simple approach, minimum stock is the quantity needed to cover sales during the restocking lead time:
Minimum stock = average sales × restocking lead time
For example, if a product sells 5 units a day on average and the supplier delivers within 4 days:
5 × 4 = 20 units
About 20 units are needed to cover average demand during the delivery lead time.
Safety stock
Safety stock is an extra margin meant to absorb certain unforeseen events: higher-than-forecast sales, supplier delays or variations in delivery time. Its level depends on the degree of uncertainty the business wants to cover.
The reorder point
The reorder point is the level at which restocking should be prepared. In a simple approach:
Reorder point = minimum stock + safety stock
So it is the reorder point, not minimum stock alone, that serves as the operational threshold for triggering restocking. To go further on these calculations, read our article on supplier orders and the reorder point.
The metrics that help you anticipate a stockout
The reorder point is useful, but properly anticipating a stockout generally means combining several pieces of information.
Available inventory
It shows the quantity considered available for sale. Depending on the system used, this figure may take into account reservations or other movements already recorded.
The sales pace
It shows how fast the item sells. It is useful to look at recent sales and how they are changing rather than relying only on a very long historical average.
Stock coverage
It estimates how long current inventory can still cover sales at the observed pace. Two items with 20 units each can therefore carry very different risks.
The restocking lead time
It is the time between placing the order and the goods actually being available. The longer this lead time, the earlier restocking must be anticipated.
Orders already in progress
Low inventory doesn't necessarily mean a new order must be placed. A delivery may already be scheduled. You therefore need to take quantities on order into account before triggering a new restock.
A practical method to anticipate stockouts
A simple method is to proceed in several steps:
- Spot the items at riskIdentify the products whose available inventory is approaching the reorder point or whose coverage is becoming insufficient.
- Check the sales paceLook at recent sales and watch for any acceleration. A product can become at risk even before reaching its usual threshold if its demand rises sharply.
- Check incoming suppliesBefore ordering, check the quantities already expected and their planned delivery date.
- Estimate the needDetermine the quantity needed to cover expected sales until the next restocking, taking into account the desired safety level.
- Choose the right actionDepending on the situation, it may make sense to prepare a supplier order, temporarily increase the quantity ordered, transfer inventory from another location or monitor the item without acting immediately.
This method avoids two opposite mistakes: ordering too late and facing a stockout, or ordering too early and creating overstock.
High turnover: a signal to watch
Inventory turnover provides complementary information. An item whose turnover is rising may simply be performing well. But if the remaining inventory gets low and the supplier lead time is long, this acceleration can also signal an upcoming stockout.
Turnover should therefore not be interpreted on its own. It makes more sense when considered alongside available inventory, coverage and restocking lead times.
The opposite risk: ordering too early
Avoiding stockouts doesn't mean systematically keeping very high inventory. An overly cautious policy can shift the problem and create overstock.
The goal is to find a balance: enough inventory to cover demand and reasonable uncertainties, but no more than necessary.
That is why the restocking level must be adjusted according to sales, lead times and the actual behavior of each item.
How can AI help anticipate stockouts?
With several hundred or thousands of items, manually monitoring every inventory level quickly becomes difficult. An AI agent connected to the business's data can make this analysis easier.
Instead of asking:
“Which products are out of stock?”
the merchant can try to anticipate:
“Which items are at risk of stocking out this week?”
The analysis can then combine the available data: remaining inventory, recent sales, supplier lead time or orders in progress. The merchant can then continue:
“Among them, which have no delivery scheduled?”
Then:
“Prepare the restock for the items concerned.”
The value lies in moving from noting a stockout that already exists to identifying the items that need action before inventory reaches zero.
How do you determine the quantity to reorder?
Detecting the risk isn't enough. The reorder point indicates when to consider restocking, but on its own it doesn't determine how much to order.
The quantity may depend on:
- available inventory;
- expected sales;
- orders already in progress;
- the desired safety stock;
- the supplier lead time;
- packaging;
- minimum order quantities;
- the target stock.
A supplier order must therefore be calculated based on the actual need and the supply constraints. To go further on this, read our article on supplier orders and demand forecasting.
The multi-store dimension
For a business with several locations, a new supplier order isn't always the best answer. Imagine one store at risk of a stockout on an item while another location holds several weeks of inventory of the same product. A transfer can rebalance the network without increasing overall inventory.
Before recommending an order, it is therefore useful to check:
- the inventory available at the other locations;
- their sales pace;
- their stock coverage;
- the time needed to carry out the transfer.
A transfer isn't systematically preferable: its cost, its lead time and the needs of the source store must also be taken into account.
From analysis to restocking with Gillia
With Gillia's inventory management, the merchant can query their data to identify the items that need attention. For example:
“Which items are at risk of stocking out this week?”
Then:
“Prepare the restock for the items at risk.”
Depending on the available data, Gillia can bring together the relevant information and prepare the corresponding operation for validation.
In a multi-store context, the analysis can also show that another location has excess inventory. The transfer then remains a separate operation to create from inventory management.
To place this logic within the whole cycle, read our guide to store inventory management. You can also discover the Gillia use cases for tracking stockouts and items below their threshold.
Anticipate rather than observe
Good stockout management doesn't mean reacting when inventory hits zero. It means spotting early enough the items whose remaining inventory risks not covering demand until the next supply.
This requires combining several pieces of information: available inventory, sales, coverage, lead times, orders in progress and safety level.
The more reliable and regularly updated this data is, the more the business can step in at the right time without offsetting the risk of a stockout with excess inventory.
To go further, discover Gillia inventory management: real-time tracking, photo-based stock entries and alerts before a stockout.