How do companies balance inventory levels to prevent overstocking and stockouts?

The balance point depends on the cost of capital versus the cost of a stockout, SKU by SKU. A slow mover with high holding cost should run at a lower service-level target, accepting some stockouts. A top mover with high gross margin should run at a high service level even if inventory is heavier. Probabilistic planning makes this explicit: each SKU gets a service-level target tied to its economics, and the buffer is sized to hit that target with the minimum inventory. That is how the same model prevents overstocking and stockouts at once, instead of trading one for the other. The dedicated guide on how to optimize inventory without sacrificing service levels walks through the practical levers.