SMRP Best Practice Metrics FOR COMMENT

1.2 Stock Outs

A. Definition:

Stock Outs determines how many times a customer goes to the inventory supply system and
can not immediately obtain the part needed for work that must be done now. This should not
be confused with ordering a part that is not normally stocked. Many systems utilize an
integrated supply process so parts might only be ordered upon receipt of the stores request.

B. Objectives:

Stock Outs is a measure that can be used to minimize the waste associated with excess
inventory. By reducing inventory value while maintaining an appropriate level of Stock Outs,
an efficient work force with minimum inventory can be assured. By analyzing the information
provided by stock outs, management can identify planning problems, vendor supply issues,
potential over stocking, and changes in equipment reliability.

C. Formula:

Stock Outs (%) = [Number of Inventory Requests with Stock Out/

Total Number of Inventory Requests] x 100

D. Component Definitions

Number of Inventory Requests with Stock
Out
Total Number of Inventory Requests
An inventory request is considered a stock out if
the inventory item is kept on site with a normal
stocked level and the inventory request is for a
normal quantity of the item, but the order cannot
be filled with the amount of stock on hand
Total Number of Inventory Requests (Includes all
requisitions for any items listed as part of the
inventory supply system

© 2006 SMRP Page 1 of 3 Rev 4-FC

Prepared by: Kevin Stewart Date: June 1, 2006
SMRP Best Practice Metrics FOR COMMENT

1.2 Stock Outs

E. Qualification:

1. Time Basis: Monthly, could be measured Weekly

2. Indicator type: Lagging
3. To be used by: Storeroom Managers / leaders, and Maintenance managers.
4. There are several different stock situations that bear discussion:

• Integrated Supply – items that show as stock in a facilities system but are
physically kept off site at a local vendor’s site. Arrangements are made for
delivery on some prearranged schedule. The purpose of these items is to remove
stock value with minimum risk. A different metric would be appropriate to drive
behavior with these items as there may be delivery performance problems, order
transmission issues or other vendor specific problems.

• Consignment – items kept on the owner’s shelf but owned by a vendor until
requisitioned by a facility. This is again a method to reduce overall inventory
cost to a facility. However the items are kept on the shelf and therefore if
requisitioned and not available, do count as a stock out.

5. The purpose of measuring this is to assist with problem solving. This means that each
stock out should be reviewed to insure a problem doesn’t exist. Because of this it should
be easy to identify stock outs that shouldn’t be.

6. If a stock item is kept at a level of 5 and requests suddenly comes in for 100:
• If the need for the item has shifted up and that is the new quantity that will be
needed from now on - then it is a stock out.
• If a contractor or engineer is shopping and it is a one time discrepancy then it
shouldn’t count as a stock out.
• A stock out represents an opportunity to properly adjust the stores inventory to
manage the dollar value of the inventory against the consequences of the failure
to have the part in stores. This guiding principle should help to determine what is
and is not a stock out in situations that are not identified. If an opportunity was
missed – it is a stock out.

F. Sample Calculation:

A plant facility issues 1,234 stock requests in a given month as shown on the monthly stores
report. In this same month the computer reports that 30 of these requests were for more items
than were currently on the shelf. Since each Stock Out – or item that can’t be filled with
stock on hand, is reviewed the day it happens, the stores personnel found that 4 of the 30
stock outs for the month were special situations.

© 2006 SMRP Page 2 of 3 Rev 4-FC

Prepared by: Kevin Stewart Date: June 1, 2006
SMRP Best Practice Metrics FOR COMMENT

1.2 Stock Outs

The inventory manager calculates the stock % as follows:

Inventory Requests with Stock Outs = 30 stock outs – 4 irregular items = 26

Total Number of Inventory Requests = 1,234

Stock Outs (%) = [Number of Inventory Requests with Stock Out/

Total Number of Inventory Requests] x 100

Stock out % = (26 / 1234) x 100 =0.021 x 100 = 2.1% .

The contractor and engineers involved in the discrepancies were instructed on the proper use
of the stores system.

© 2006 SMRP Page 3 of 3 Rev 4-FC

Prepared by: Kevin Stewart Date: June 1, 2006