What does the term 'Stock out' signify?

The term 'stock out' signifies a situation where demand for a product exceeds the available stock. This occurrence can lead to missed sales opportunities, dissatisfied customers, and potential damage to the business's reputation. When a stock out happens, the company cannot fulfill customer orders because it does not have enough product to meet demand, resulting in lost revenue.

In supply chain management, understanding stock-outs is essential because it emphasizes the importance of balancing inventory levels to prevent disruptions in service and maintaining customer satisfaction. Efficient inventory management seeks to minimize stock-out situations by accurately forecasting demand and maintaining adequate stock levels to meet customer needs.