How to Prevent Stock Outs: The Cost of Stockouts to Business
Have you ever gone to a store only to find that they were out of the one item you needed? It’s frustrating, isn’t it? Well, imagine how your customers feel when they can’t find what they need on your website. Stock-outs are more than just an inconvenience – they can actually cost you sales and damage your reputation. That’s why it’s so important to know how to prevent stock outs from happening in the first place. This article shows you how to prevent stock outs and keep your customers happy.
Are Stockouts a Big Problem in Your Store?
Do you find that stockouts are a big problem in your store? If so, how do you deal with them?
What is the impact of stockouts on sales?
In the retail and eCommerce industries, stockouts generally refer to empty shelves and an inability to fulfill orders to meet customer demand.
The impact of stockouts on sales can be significant, causing customer satisfaction to decline and leading to immediate and future sales losses.
What is the cost of stockouts?
This can then cause disruptions further down the chain, potentially causing a ripple effect. In manufacturing and distribution centers, a disruption of just one or two parts can shut down an entire line. This can then cause a chain reaction, where other suppliers are unable to provide their goods, and this can cause a domino effect of inventory shortages.
This can have a domino effect down the supply chain, impacting availability downstream and potentially causing a bullwhip effect.
A 2-3% loss of revenue each year is attributed to retailers that run out of inventory. This can result in long-term damage to the company’s brand and result in unhappy customers who may shop elsewhere.
Stockouts are a huge problem in the retail environment, costing companies billions of dollars a year. In fact, a recent study by consulting firm, McKinsey, found that U.S. grocers alone are losing 2-3% of annual sales due to out of stocks.
What causes stockouts?
There are many reasons why stockouts are likely to occur. These include not anticipating enough demand, shipment variances, and not having enough money available to buy more products.
There are a number of reasons why stockouts might occur. For example, production delays, delivery issues, unpaid invoices, or human error can all impact inventory levels. While it’s not always possible to prevent stockouts completely, there are steps you can take to minimize their occurrence and minimize the impact when they do happen.
If you find that you’re experiencing stockouts frequently, it may be time to consider changing supply chain partners. Alternatively, you could look into ways to improve your supply chain management, such as partnering with a third-party logistics provider or using tools to help with inventory forecasting.
How EazyStock Can Help Your Inventory Management Processes
If you’re worried about upcoming stockouts, a risk of stockout report can give you valuable insights. But setting up and managing such a report can be time-consuming. Fortunately, there are software solutions that can do the work for you. By automating the process, they can save you precious time and effort.
An inventory optimization tool, such as EazyStock, can help you avoid stockouts by automatically calculating the risk of stockouts for you. By connecting to your existing stock management system, EazyStock can help you keep track of your inventory and predict when stockouts are likely to occur.
With stock demand forecasting software, you can predict future demand for your products based on previous sales and current supply. This helps you prioritize which products to focus on.
EazyStock’s run-out report will help you predict when stockouts will occur so that you can take action to prevent them.
This means you can focus on more important things than stockout calculations and put a plan in place to reduce disruption.
If you want to learn how our stock management software can simplify your processes, reduce inventory errors, and free up your time, you can request a free demo.
How to Prevent Stockouts
It’s an inventory management problem that can be fixed, but it requires an investment in time and resources.
The following are the ways retailers can prevent their stores from running out of inventory:
1. Inaccurate Inventory Data
Inaccurate inventory data is one of the leading causes of stockouts. This can be due to various reasons, such as incorrect demand forecasts or inaccurate information about how much stock is on hand.
One of the main reasons stockouts occur is because of inaccurate data. This can happen in several ways, such as when goods are received from vendors, during data entry, or during physical counts. Another reason for inaccurate data is theft.
Each of these can be prevented through organization and automation.
Inventory levels can be tracked by cycle counting, which ensures that your organization is staying organized.
A cloud-based inventory system can reduce the time it takes to enter new stocks into the database. The POS should be connected to the system for real-time updates.
2. Knowing When to Reorder
Much of this may be caused by seasonal fluctuations. Timing is critical for reordering inventory. By analyzing historical sales data, businesses can identify patterns and spikes in customer demand. This information can help businesses anticipate seasonal fluctuations and plan accordingly.
What seasonal fluctuations are you referring to?
When it comes to reordering, retailers should pay close attention to trends within product categories, rather than individual products. This will help improve demand forecasting and save time.
3. Vendor Relationships
Retailers rely on vendors for everything from increasing their profit margins to fulfilling order quantities. However, in the past, this relationship was a lot more one-sided.
These days, they act as partners, not vendors.
By consolidating your vendor list, you can reduce costs and wasted resources. By working with fewer suppliers, you can secure lower prices and better shipping options.
4. Employee Training and Management
No matter how sophisticated your software, a lack of training can lead to mistakes during every stage of the inventory tracking process.
People in the workforce sometimes make small mistakes that they try to cover up with snap decisions. These can lead to bigger problems.
Employees are the most important asset of any business. That’s why it’s crucial to invest in their training. By doing so, they will be able to prevent potential issues before they happen.
Employees need to be properly trained on the inner workings of the pos system as well as all procedures to avoid any issues. It is important they are always aware of potential problems that could arise.
A proactive employee is always looking for ways to improve the process and prevent errors. They are always willing to contribute to process improvements.
Common Questions About How to Prevent Stock Outs
Here are some questions we hear from businesses about preventing them from running out of stock.
How do I better forecast sales for peak demand or seasons?
Historical data is the best way to forecast demand for products that have a specific time of year when they sell the most. Relying only on the average month’s sales can lead to inventory shortages during peak season.
SkuVault’s historical data tracking can help you maintain appropriate stock levels by reordering inventory to meet peak demands or seasonal changes.
What to do if you go out of stock?
If a product runs out of stock, a seller can take a few steps to prevent the stock-out from happening again. They can try to increase the inventory, notify the customer that the product is not available, or find a substitution for the product.
Here are a few tips you can use for “out of stocks” scenarios.
Tell customers where they can buy the item offline
When a multichannel retailer displays a message like “This product is currently out of stock,” it may turn off many online buyers. There is a high chance that he or she will never come back to your store again.
If you’re looking for this product offline, your best bet would be to check your local stores. If they don’t have it in stock, you could always try searching online retailers or the manufacturer’s website.
So, make sure that you’re not that vendor where customers don’t receive their products – because competitors are just waiting for every opportunity.
If you’re running low on a product but it’s available at a nearby location, contact your customers to let them know where they can go to get it. That way, you won’t lose the sale!
Never let your product page be down (404 error)
Social media ads are everywhere.
What if you came across an appealing mobile ad, only to be met with a big, bold “404 Error Page Not Found” message? Talk about frustrating! Make sure your product page is always up and running to avoid losing potential customers.
If you don’t want to lose any customers or affect your Google ranking, make sure your product page is never down!
If a product is unavailable, then it’s best to keep the page active. If there’s no stock, then redirect to a related product or keep it as is. If it’s permanent discontinuation, then a 410 code can be used.
Conclusion
If you’re worried about stock outs, the best thing you can do is prevent them from happening in the first place. There are a few simple steps you can take to make sure your customers always find what they need on your website. By following these tips on how to prevent stock outs, you’ll avoid lost sales and damage to your reputation.
