"We might stock out" is too vague to act on. Stockout risk becomes useful only when it carries a date: which SKUs run dry within 14 days, which within 30, which within 60. Each horizon matches a different purchasing rhythm, a different owner and a different kind of fix.
Key takeaways
- Stockout risk is days of supply compared with the time it takes to get more stock, not a feeling about a busy line.
- Three windows cover most distributors: 14 days for expedite decisions, 30 days for the standard reorder cycle, 60 days for structural fixes.
- Rank inside each window by revenue at risk, not by unit shortfall. A low-volume expensive line can outrank a pallet of cheap parts.
- Each window has one meeting and one owner. Mixing horizons in a single list is how the urgent buries the important.
- Open purchase orders and in-transit stock belong in the days-of-supply math, otherwise you will expedite goods already on the road.
What stockout risk actually measures
Strip the jargon and stockout risk is one comparison: how many days your sellable stock lasts at current velocity, versus how many days it takes to receive more. Days of supply on one side; supplier lead time plus receiving time on the other.
When days of supply drops to the lead time or below, you are already at critical risk: even a perfect order placed today arrives after the shelf empties. Between one and two lead times, you are in the reorder window and still have room to act calmly. Above two lead times, the line is fine and should stay off the list.
Days of supply, done properly
Days of supply = sellable on-hand ÷ daily run rate. Two corrections matter. First, use a 12-week velocity, adjusted by the last four weeks, so a recent spike or a fading line moves the number. Second, add stock already on open purchase orders with a realistic receipt date. A line at 9 days of supply with 600 units landing on day 6 is not an emergency.
The three windows
| Window | Use it for | Owner | Typical action |
|---|---|---|---|
| 14 days | High-velocity, perishable or SLA-backed lines; anything with days of supply at or below lead time | Stock manager, daily stand-up | Expedite, substitute SKU, allocate to priority accounts, transfer from another site |
| 30 days | Core catalogue; days of supply between one and two lead times | Buyer, weekly purchasing block | Place the reorder at the recommended quantity, check MOQ and case packs |
| 60 days | Imported, long-lead or seasonal lines where ordering late is expensive and ordering early traps cash | Supply chain lead, monthly S&OP | Renegotiate MOQ, add a second supplier, adjust safety stock, pre-book capacity |
14-day window: the expedite list
This list should be short. If it has forty lines every morning, either lead times in the system are wrong or the reorder window upstream is being ignored. Every entry needs a decision today: pay for faster freight, sell a substitute, or ring-fence the remaining units for contracted customers.
30-day window: the standard reorder cycle
This is where most reorders should be born. Days of supply is above lead time but below twice lead time, so a normal purchase order at a normal quantity closes the gap. The buyer's job is to check the recommended quantity against minimum order quantities, case packs and supplier promotions, then approve. Lines that keep reappearing here after every order are telling you the reorder quantity is too small.
60-day window: structural fixes
Long-lead lines, imported goods and pre-season buys do not fit a weekly rhythm. The risk here is not this week's shelf but next quarter's: a supplier whose receipt history shows a 40-day spread around the promised date, a single source for a contracted part, an MOQ that forces you to overbuy. These are fixes for the monthly review, with finance in the room.
Rank by revenue at risk, not by quantity
Within a window, sort by the money on the line. A workable estimate:
Revenue at risk = forecast units short during the window × unit price × probability the sale is lost
The last factor matters. A commodity fitting with three substitutes on the shelf loses little; a contracted part with no substitute loses the full order and sometimes the account.
| SKU | Days of supply | Lead time | Units short (14 d) | Unit price | Loss probability | Revenue at risk |
|---|---|---|---|---|---|---|
| 4821 | 6 | 21 | 320 | €38 | 0.9 | €10,944 |
| 1190 | 4 | 7 | 1,400 | €2.10 | 0.4 | €1,176 |
| 7732 | 11 | 14 | 90 | €120 | 0.7 | €7,560 |
By unit shortfall, SKU 1190 looks worst. By revenue at risk it is last. That is the reordering the list should show.
One meeting per horizon
- Daily stand-up, 15 minutes: the 14-day list only. Decide expedite or substitute per line; log who owns it.
- Weekly purchasing block: the 30-day list, capped to what receiving can process. Approve quantities, note overrides.
- Monthly S&OP: the 60-day list, plus the pattern in last month's overrides. Structural decisions only.
Keep the lists separate. Once a 60-day supplier problem enters the daily stand-up, the 14-day lines lose attention.
How Flowra handles this
Flowra computes a stockout signal for every product on each nightly run, or on demand. It compares reconstructed days of supply with the supplier lead time and files the line as critical (at or below one lead time), reorder soon (between one and two lead times) or ok. When stock cannot be reconstructed reliably, the signal is unknown and it is never presented as a number. That is a deliberate choice: an unknown stated as a certainty is how teams learn to ignore alerts.
Alongside the signal, Flowra drafts a reorder using the reorder-point formula (average daily sales × lead time, plus a 95 percent service-level safety term) and shows the fact, the forecast, the hypotheses and a confidence badge. Critical lines can be pushed to Slack, Teams or email through daily alert rules, and the Monday digest summarises what moved into high risk during the week. Nothing is ordered until a buyer approves; the assistant only answers from your data and says so when the data is too stale to trust. The four-layer model explains where the human sits in that loop, and the FAQ covers how quickly signals refresh.
- Fact
- Reconstructed days of supply: 6. Supplier lead time from the last 14 receipts: median 21 days. Stockout signal: critical. No open purchase orders.
- Forecast
- At 15 units/day (12-week velocity, +18% over 4 weeks) the shelf empties on day 6. Revenue at risk over 14 days: about €10,900, two contracted accounts affected.
- Recommendation
- Order 640 units (reorder point 315 + cover to 60 days). Alternative: expedite 200 units by air and ship the rest by road.
- Hypotheses
- Lead time holds at 21 days; the 4-week demand rise is not a one-off promotion; no substitute SKU in stock.
- Next step
- Approve, adjust the quantity, or ask why. Nothing changes in the ERP until you do.
Frequently asked questions
How is stockout risk calculated?
Compare days of supply (sellable stock divided by daily run rate, including open purchase orders) with supplier lead time. At or below one lead time is critical; between one and two lead times means reorder soon; above two lead times the line is fine for now.
Which stockout window should a distributor use by default?
Thirty days. It fits a weekly buying cycle and standard supplier lead times, so most reorders can be placed calmly. Reserve the 14-day list for expedite decisions and the 60-day list for structural fixes such as MOQ or second sourcing.
Why rank stockouts by revenue at risk instead of units?
Unit shortfall favours cheap, high-volume lines. Revenue at risk multiplies units short by price and by the probability the sale is actually lost, so a contracted part with no substitute rises to the top even at low volume.
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