Stock Out Probability Calculator

Stock Out Probability Formula

The stock-out probability (\(P_S\)) is calculated by the following formula:

\[ P_S = \frac{E_S}{E_D} \times 100 \]

where:

• \(P_S\): Probability of a stock out (in percentage)
• \(E_S\): Number of expected stock outs
• \(E_D\): Number of expected demand requests

Example Calculation

If a business expects 25 stock outs and anticipates 100 demand requests, the probability of a stock out is calculated as follows:

\[ P_S = \frac{25}{100} \times 100 = 25\% \]

Common FAQs

1. What is a Stock Out Probability?

• The stock-out probability measures the likelihood that a product will not be available when a customer places an order. A low probability indicates that the inventory level is sufficient to meet demand, while a high probability suggests a potential inventory shortage.

2. How can I reduce the Stock Out Probability?

• To lower the stock-out probability, consider adjusting inventory levels, improving the supply chain's efficiency, or better forecasting demand to balance supply and demand.

3. Why is the Stock Out Probability important?

• Understanding this probability helps businesses maintain adequate cash flow, reduce customer dissatisfaction due to unavailable items, and prevent revenue loss from unmet demand.