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When you run out of stock and you miss an order, someone should be evaluating why this is happening to change purchasing habits and processes. Keep track regularly (weekly, daily, bi-weekly) of all products that are out of stock. Evaluate why the item was out of stock and what modification to the weekly order can be changed or altered so it does not occur again. Calculate the lost sales net profit that having these gaps in inventory are causing. It may not be worth carrying lots of inventory just to capture a few sales with margin dollars not large enough to pay for carrying costs (debt interest on AP invoices). Do the math and calculate the margin on lost sales versus the carrying costs of a larger inventory.
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