What does the term "Stockout" indicate?

The term "Stockout" specifically refers to a situation where the inventory of a particular item is completely unavailable to meet demand. This means that when a customer wants to purchase a product, the business cannot fulfill that request because the item is out of stock. Stockouts can lead to lost sales, dissatisfied customers, and can adversely affect a company's reputation. It highlights the importance of effective inventory management and forecasting to ensure that stock levels are adequate to meet customer demand.

The other options describe different inventory management scenarios that do not align with the definition of a stockout. Keeping minimal inventory on hand is an inventory strategy that seeks to reduce holding costs, while surplus inventory indicates that there is more stock available than what is currently needed. A decline in product quality leading to returns deals with issues post-purchase rather than with stock availability. Therefore, the focus of the term "stockout" is on the absence of inventory to satisfy customer demand, which is accurately captured by the correct answer.