Inventory planning
Lost Sales
By the Supply Chain Manager team · Updated October 16, 2026
Lost sales are demand that walks away because an item was unavailable: the customer bought elsewhere instead of waiting for a backorder.
Lost sales are hard to measure because they leave no order behind. Common proxies are quotes that were not converted, cancelled lines and enquiries logged by the sales team while a SKU was out of stock.
They also distort history. If you only record shipments, a SKU that was out for two weeks looks as if demand fell, and the next forecast orders even less.
Lost sales example
Illustrative numbers: a SKU normally ships 20 a day. During an 8-day stockout, 60 units were backordered. A rough estimate of lost sales is 8 × 20 − 60 = 100 units, assuming demand stayed at its normal rate.
Why lost sales matters for distributors
Repeated lost sales teach customers to shop around. For a distributor, being the reliable source is often worth more than a slightly lower price.
Common lost sales mistakes
- Ignoring lost sales because they do not appear in the ERP.
- Forecasting from shipments during stockout periods without adjusting for suppressed demand.
Examples on this page use made-up round numbers to show the calculation. They are not benchmarks or results from real businesses.