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Stock levels, stockouts and overstock

| Article: 3 min read | Catalog and marketplaces

Inventory management is controlling how much of each product is in the warehouse, how much is needed and when to order, so that you do not lose sales to stockouts and do not freeze cash in overstock. A stockout (out-of-stock) means the shopper wanted to buy but the product is not there; overstock means there is more product than sells.

In plain words

Both mistakes cost money. A stockout is a lost sale, sometimes a lost customer. Overstock is cash frozen in the warehouse, discounts to get rid of the goods, and storage costs. The task is to keep the balance for each product separately, not "a bit more, just in case."

Scale of the problem

According to an IHL Group estimate (a 2026 study) as reported by Retail Insight Network (August 6, 2026), global retail losses from stockouts and overstock come to about 1.7 trillion USD a year, or 6.2% of global retail sales (Retail Insight Network, 2026). These figures refer to global retail, not to online commerce in Ukraine. For your store they only illustrate the order of magnitude.

Key metrics

These are standard formulas, not study data.

  • Turnover = cost of goods sold ÷ average inventory value for the period. Shows how many times the warehouse "turned over."
  • Days of stock = stock on hand ÷ average daily sales. Shows how many days the product will last.
  • Availability rate = the share of days when the product could be bought.
  • Dead stock = products with no sales over a chosen period (for example, 180 days).

Example (illustrative numbers)

A store sells phone cases. Stock is 300 units, sales are 10 units a day. Days of stock: 300 ÷ 10 = 30. A delivery takes 14 days. Reorder point: 14 days × 10 units = 140 units plus safety stock (for example, 3 days, or 30 units) = 170 units. When stock falls to 170, it is time to order.

What to do

  1. Split products by importance. ABC/XYZ analysis: hold stock more strictly for the main products and keep it minimal for rare ones.
  2. Set a reorder point for each important product, taking the lead time into account.
  3. Show availability honestly. A product that is not there is better marked "out of stock" with a similar item or a back-in-stock alert, than promised and then canceled.
  4. Sync stock between the site, the warehouse and marketplaces (Rozetka, Prom); mismatches lead to canceled orders. See Order and warehouse systems and Fulfillment.
  5. Get rid of overstock in time: a promotion, a bundle, returning to the supplier, but count the margin (Gross margin).
  6. Forecast demand with simple methods first, then more complex ones (Demand forecasting and AI). A 2025 study on the M5 data shows that forecast accuracy matters more when holding costs are comparable to or higher than the cost of lost sales; and when lost sales cost more, the best method is not necessarily the most accurate (IDEAS/RePEc, 2025). So for products where a shortage hurts more than overstock, stock is held with a buffer.

Common mistakes

  • One approach for all products.
  • Calculating demand from sales during periods when the product was not available: it gets understated for nothing.
  • Buying at the supplier's price without accounting for turnover and storage costs (cost of ownership).
  • Not tracking "dead stock."
  • Manual stock in a spreadsheet with several sales channels.

FAQ

What is a stockout? A situation where the product is not in stock and the shopper wants to buy it.

How do I calculate how much to order? Multiply average daily sales by the lead time, add safety stock and subtract the stock on hand.

Which is better: a stockout or overstock? It depends on the product: for fast-moving, high-margin products a stockout costs more, for seasonal and expensive ones overstock does. There is no universal answer.

Do I need an inventory system? When stock is kept in several places or channels, yes: see Order and warehouse systems.

Sources

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