CPIM Practice Exam

What is the primary purpose of having stockout costs tracked?

1. To increase sales opportunities

2. To identify surplus inventory

3. To understand potential losses from inventory shortages

4. To facilitate more efficient ordering practices

The correct answer is: To understand potential losses from inventory shortages

The primary purpose of tracking stockout costs is to understand potential losses from inventory shortages. When a company experiences stockouts, it means that they do not have sufficient inventory on hand to meet customer demand. This can lead to missed sales opportunities, as customers may turn to competitors if their needs are not met. By understanding the financial impact of these shortages, companies can make informed decisions about inventory levels, minimize stockouts, and ultimately enhance customer satisfaction. This tracking allows organizations to quantify the costs associated with running out of stock, which can include lost sales, decreased customer loyalty, and additional costs related to expediting orders. With this information, businesses can strategize better inventory management and ordering practices to strike a balance between maintaining enough stock to satisfy demand without incurring unnecessary holding costs.