What is a stockout?

A stockout refers to a situation where there is insufficient inventory available to meet customer demand. This occurs when the stock levels of a product drop to zero or below the quantity needed for immediate fulfillment of customer orders. A stockout can lead to lost sales, dissatisfied customers, and potential reputational damage to a business since it cannot fulfill orders due to lack of product availability. Recognizing and managing stockouts is crucial in inventory management to ensure that supply effectively meets demand and that customers can always find the products they need when they need them.

In contrast, other choices address different inventory scenarios: over-ordering situations involve having more goods than necessary; excess inventory indicates that there is a surplus of goods rather than a lack; and a price increase due to demand relates to market dynamics but does not refer directly to stock levels. All of these highlight various aspects of inventory management, but they do not capture the essence of what a stockout is.