By Matthew Deeter
In more than 25 years of working in the retail environment, I must have participated in hundreds of meetings exploring ways to improve out-of-stocks. These discussions normally pitted the store operators against the merchants, logistics managers versus suppliers, and financial auditors versus everyone. The results of these discussions normally yielded very creative ways to measure and track the impact of out-of-stocks.
One of the cornerstone assumptions perpetuated in the discussions was that sales are lost for the period of time the product is out of stock. While this is a valid assumption, it is not entirely pure, as customers may substitute products or postpone sales when faced with an empty shelf. It is here where most formulas break down, as they can only make a best guess on how the customer will react.