Optimization objective: Avoiding stockouts

Avoiding stockouts is one of the five fulfillment objectives that the Optimization service considers when optimizing orders. When this objective is prioritized, fulfillment decisions are based primarily on preventing stockouts at nodes while still meeting customer expectations. Optimization service analyzes the possibility of a potential future stockout at each node and favors options with the lowest probability of a future stockout to fulfill the order.

Overview

Optimization service considers the following factors when optimizing orders with a priority of avoiding stockouts:

In-store and online sales
Future replenishments
Markdown plans
Inventory availability

The inventory model analyzes the possibility of a stockout at a node, balances the inventory of a SKU at the network level, and avoids stockouts by shipping from alternative nodes. This model is based on the probability and predicted demand of an item. It is calculated for the SKU-ship node combination by using a proprietary algorithm based on feeds of inventory, markdown, TLOG, order, replenishment and SKU data. The system uses demand predictions to calculate the stockout avoidance cost at the SKU-ship node level. The stockout avoidance cost represents the estimated amount of money that would be lost due to the predicted stockout.

To avoid stockouts, the Optimization service performs the following actions:

Learns sell-through patterns by using inventory and sales data to assess the risk of a stockout.
Assigns a value to the risk of stockout based on the probability of in-store and e-commerce sales during stockout and replenishment schedules.
Sources SKUs to maintain the safety stock level.

You can adjust the Optimization profile to prioritize Stockout avoidance. For more information about the optimization profile, see Managing optimization profiles.

For more information about avoiding stockouts in a real-time scenario, see Scenario: Stockout avoidance optimization.