The Escalating Stockout Cost Problem

Abstract

In June, 1978, a Utah company had to lay off 47 workers because of a shortage of bushings. This was the third stage in a stockout-caused crisis made up of three stages, each with its own problems, each with a stockout cost higher than the stockout cost of the previous stage. This problem is typical of that encountered often in industry, and its significance justifies the time and effort needed in its solution.