As the ratio of the cost of overstocking to the cost of understocking gets smaller,the optimal level of product availability decreases.

Cost of Overstocking

Expense incurred from holding too much inventory, including storage costs, decreased product value, and potential obsolescence.

Cost of Understocking

The financial and operational impact of not having enough inventory to meet demand, leading to lost sales and dissatisfied customers.

Product Availability

The extent to which goods or services can be purchased from suppliers by consumers at any given time.