Stockout is a situation where an inventory item is not available when required. The costs associated with a stockout include the following:
- Lost of production output - there will be no production until the stockout is resolved (new stock is acquired). For factory operating 24/7 with no spare capacity, this lost output will not be able to be recovered.
- Costs of machine downtime and of overhead spread over a reduced level of output
- Costs of any action required to deal with the stockout...
- Loss of customer goodwill through inability to supply or late delivery
- Loss of sales or new orders
- Loss of market creditability
Reference:
LO 2, AC 2.2

If the planning and mitigation measures fail and redundant or obsolete stock is identified, it needs to be removed from the current inventory location as quickly as possible. There are some methods to deal with these types of stock. The worst case scenario is disposal to landfill, which is inadvisable if it can be avoided, both from environment point of view and the financial costs of such disposal.
For example, the problem of obsolete pesticides remains extremely serious and urgent. Many of the stocks identified continue to deteriorate thereby giving rise to an ever escalating source of severe pollution and posing a threat to human health, the environment and development in particular. To reduce the impact of obsolete pesticides on environment, FAO initiated a project in Yemen in which a total of 262 tonnes of obsolete pesticides were removed from 20 different sites and successfully disposed of between March and June 1996. The major field operation was completed in six weeks during which period almost all obsolete pesticides were brought to a central location and subsequently shipped to the United Kingdom for incineration.
Reference:
LO 2, AC 2.1

Economic order quantity (EOQ) model is the method that provides the company with an order quantity. This order quantity figure is where the record holding costs and ordering costs are mini-mized. By using this model, the companies can minimize the costs associated with the ordering and inventory holding. In 1913, Ford W.
Harris developed this formula whereas R. H. Wilson is given credit for the application and in-depth analysis on this model.
If the economic order quantity model is applied, the following assumptions should be met:
- The rate of demand is constant, and total demand is known in advance.
- The ordering cost is constant.
- The unit price of inventory is constant, i.e., no discount is applied depending on order quantity.
- Delivery time is constant.
- Replacement of defective units is instantaneous.
- There is no safety stock level, i.e., the minimum stock level is zero.
- Restocking is made by the whole batch.
Because the demand and lead time are constant, no stockout events can occur.
Reference:
LO 2, AC 2.3

Below is a formula from Toyota you can use to make an informed decision.
1. Start with the basic right-angle stacking width
2. Add the load length
3. Add 12 inches for clearance
The basic right-angle stacking width is the smallest amount of space a forklift needs turn in order to insert its forks into a pallet. You can find basic right-angle stack measurements in the equipment manual or by contacting TMHNC if your business is located in Northern California. This measurement does not include the length of the load or room need for clearance.
Load lengths vary depending on your application, products, etc. As a starting point, a standard pallet has a 48-inch load length. Always check your forklift's data plate for the rated capacity (which is affected by attachments and other factors).
Adding 12 inches for clearance ensures you have enough room for your forklift's turn radius and helps protect against damage from operator error and/or product that may hang over the edge of the pallet.
Reference:
- CIPS study guide page 29-30
- How to Calculate Forklift Aisle Width Minimums
LO 1, AC 1.1

Materials that will not easily deteriorate, are generally stored in open or fairly covered areas (stockyard). The materials are usually in bulk, like steel plates or coils casting, timber coal, steel barrels, cable drums, piping, lampposts, lorries, etc.
Stockyards are open or semi-covered areas that are used for the following:
- Bulk loose or packaged materials
- Bulky or oversized items that may be difficult to move inside
- Materials that may require specialised handling, loading or unloading Below image shows the example of a stockyard that stores loose coal and its handling system.

LO 1, AC 1.1