CPIM Practice Exam

What is stockout percentage used to measure?

1. The frequency of production delays

2. The effectiveness of responding to actual demand

3. The amount of excess inventory on hand

4. The total sales volume over a period

The correct answer is: The effectiveness of responding to actual demand

Stockout percentage is a critical metric used to evaluate how effectively a business responds to actual customer demand. It quantifies the likelihood that inventory will be unavailable when a customer seeks to make a purchase. A high stockout percentage indicates that a business frequently fails to meet customer demand, which can lead to lost sales and negatively impact customer satisfaction. Conversely, a low stockout percentage suggests that the company is effectively managing its inventory levels to meet demand. In assessing options related to production delays, excess inventory, or total sales volume, none of these directly measure the capacity to fulfill orders based on actual demand. Therefore, focusing on the stockout percentage enables organizations to identify gaps in inventory management and improve their ability to serve customers effectively. Recognizing and managing stockout situations is essential for maintaining competitiveness and ensuring customer loyalty.