403. Stockout Rate
The measured frequency of stockouts. A KPI for assessing how well an inventory system is actually performing — distinct from the target service level used to design the policy.
Three common formulations:
| Variant | Formula | What it measures |
| Cycle stockout rate | (cycles with stockout) / (total cycles) | Frequency of stockout events |
| Time stockout rate | Time out of stock / total time | Fraction of time out of stock |
| Item stockout rate | (SKUs out of stock at moment ) / (total SKUs) | Snapshot view across the catalog |
403.0.1. Cycle stockout rate (target = )
Tracks the fraction of replenishment cycles that hit stockout at least once. Measures the same quantity that cycle service level (CSL) targets:
Use when designing policies around the target and verifying you hit it in operation.
403.0.2. Time stockout rate (target ≈ )
Tracks time fraction out of stock. Equivalent to ready rate (see [ready_rate.typ](../service_levels/ready_rate.typ)).
Easy to compute from ERP data — just sum the duration of zero-on-hand periods.
403.0.3. Item stockout rate (catalog-level)
Snapshot of how many SKUs are out of stock at a given moment, expressed as a fraction:
Tracked over time as a daily / weekly time series. Common retail KPI, sometimes called out-of-stock rate or fill-rate-on-shelf.
403.0.4. Why measure it
The target service level (CSL = 95%, fill rate = 99%) is what you aim for during policy design. Actual stockout rate tells you whether the system is performing as designed. Common reasons for divergence:
- Demand forecast wrong → safety stock too low.
- Lead times longer than assumed → reorder point too low.
- Demand more variable than assumed → underestimated.
- Operational errors — late ordering, miscounts, supplier delivery issues.
If actual stockout rate >> target, the physical operation is breaking, not the design. Different remedy.
403.0.5. Connection to other metrics
| Metric | Counts | Stockout-rate equivalent |
| CSL () | Cycles | Cycle stockout rate |
| Fill rate () | Units | 1 - Fill rate (unit stockout rate) |
| Ready rate () | Time | Time stockout rate |
Different denominators measuring “how often things go wrong” — choose what your stakeholders care about.
403.0.6. Diagnostic combinations
- High cycle stockout rate, low time stockout rate: stockouts are frequent but short. Replenishment is reactive but fast.
- Low cycle stockout rate, high time stockout rate: stockouts are rare but long. When they happen, they linger — usually a supply-side problem (lead time, supplier issue).
- Item stockout rate growing over time: catalog-wide degradation — could be a forecasting drift, a supplier-base issue, or demand surge across products.
Example
Given (one quarter of inventory data):
- 100 SKUs, monitored daily for 90 days.
- Combined: 27 stockout events. Total stockout days: 45 (across all events and SKUs).
- Average number of active SKUs: 100. Snapshot at end of each day shows on average 1.2 SKUs out of stock.
Step 1 — cycle stockout rate
Total cycles: each SKU experiences 12 cycles per quarter (assuming monthly replenishment). Across 100 SKUs: 1200 cycles.
Equivalent: actual CSL = 97.75%. If the target CSL was 95%, the operation exceeds its target.
Step 2 — time stockout rate
Each SKU has 90 SKU-days; total SKU-days = 9,000. Stockout SKU-days = 45.
Equivalent: actual ready rate = 99.5%.
Step 3 — item stockout rate
Average daily snapshot: 1.2 SKUs out of 100 are out of stock.
Step 4 — interpret
Cycle rate (2.25%) is higher than time rate (0.5%) — the stockouts are short. On average, days each. The team responds quickly.
Item rate of 1.2% means at any given snapshot, about 1 SKU in 100 is unavailable. For 100 SKUs that’s noticeable; for a 100,000-SKU retailer, that’s 1,200 missing items.
Step 5 — drill down
Which SKUs account for the 27 stockout events? If concentrated in 5 SKUs (each stockout 5–6 times), they have policy issues — investigate forecasting, safety stock, lead time. If spread across all 100, the problem is systemic.
Always cross-tab stockout rate against ABC and VED: an A or V class item being out is much more costly than a C or D class.