Every customer has discovered the term “product not available” in their shopping journey. This instills a feeling of frustration and dissatisfaction among customers. There might be chances that your product has gained immense popularity and people immediately purchase it. But still, if the product remains unavailable, it poses a concern. Such situations of product unavailability are termed “stockouts” or “out-of-stock”. These situations can have a major impact on a business’s sales and ultimately customer experience. At the initial stages, no stock implies no sale. But if this problem persists for a longer period of time, it might force your customers to go elsewhere. Not to worry, this blog is all you need to know the essential strategies to prevent stockouts. So, let us dive right in!
What is StockOuts/Out of Stock?
Stockouts or out of stock situations take place when an organization lacks product availability. This implies that a particular product is not available in the warehouse or in-store and thus cannot be delivered to customers. Your shelves might go empty, orders will go unfulfilled and manufacturing processes might come to a sudden stop. There could be numerous reasons behind stock outs in companies. Some are under your control while some are not.
The Common Causes of Out of Stock
Getting to know about the main causes behind stockouts will provide a clearer picture. Once you know about the causes you will be able to implement strategies to eliminate them.
- Bad Forecasting: Forecasting can make or break your business. Demand and supply are not just mere terms, these affect your inventory system. Forecasting is highly dependent on these factors. One little mistake in forecasting and you can have multiple knock-off effects. One of them being stockouts or out of stock situations. Having too much inventory will add up to your storage space and costs. But running out of stock poses a bigger problem. Herein, you take a risk on your end customer which can never be fruitful for your business. Therefore, accurate forecasting is a much-needed factor that ensures optimum stock level and prevents stockouts.
- Wrongful Records: Another leading cause of inventory stock out is inaccurate records. These errors are often because of manual mistakes, particularly miscounting. Like typing the wrong number while manually managing the inventory system. In addition to this, certain technical problems might also create stockouts in businesses. For instance, if a company has multiple sales channels, inventory counts might not be updated in real time due to technical glitches. Such issues will lead to wrong estimation of products and hence lead to inventory stock out.
- Reliability Issues: The supply chain is another integral part of any business. At some point in your business, you might face damages, delays, or errors in your deliveries from suppliers. This will disrupt product availability and ultimately lead to stockouts. To address these issues, it is vital to maintain strong relationships with reliable suppliers. Ecommerce businesses can also diversify their supplier base to minimize dependency on a single source.
- Erroneous Reporting: Sales data is significant for businesses, but its value relies on accuracy and timeliness. When data is incomplete, incorrect, or outdated, inventory levels can quickly become imbalanced. This makes it challenging to formulate informed business decisions. A lack of reliable information can lead to wrong anticipation and response to fluctuations in supply or demand becomes nearly impossible. As a consequence, stockouts can occur more frequently. To eliminate this, it is critical to closely evaluate inventory levels and replenish stock based on actual sales and demand trends, instead of relying on guesswork or assumptions.
How do Stockouts Impact Your Sales?
Stockouts can have a substantive impact on your business sales, primarily by causing lost sales opportunities. When customers can’t find the products they want, they are likely to replace you, resulting in revenue loss. Additionally, frequently running out of stock can result in unhappy customers, as frustrated shoppers may instill a negative perception of your brand. This dissatisfaction can erode customer loyalty, making it less likely that they will return for future orders.
Not only the above, but reputational damage is another tough nut to crack from consistent stockouts. Your customers need product availability and when their expectations are not met, they may get involved in negative word-of-mouth, further impacting your brand's standing. As a result, you might encounter a decline in market share, as customers will shift their loyalty to businesses that can meet their demands.
Avoid Stockouts: Implement These Strategies
- Data Analysis Over Extended Times: Looking at data can be really exciting! When you start using data to understand your business, you might find yourself really getting into it. But remember, the conclusions you draw from the data are your own interpretations. For instance, if you notice that demand for a specific product suddenly jumps, you might conclude, "I need to keep a larger stock of this product!" However, it is crucial to be cautious. That spike in sales might just be a temporary trend and not a long-term change. So, while data analysis can guide your decisions, it's crucial to consider whether those trends will last before making big changes
- Control Your Surplus Inventory: Effective management of your excess stock is indispensable to prevent stockouts. Excess stock means the inventory that surpasses the optimal level needed to meet customer demand, often resulting from wrong forecasting, bad planning, and overstocking. This surplus can lead to high inventory costs, obsolescence, and inefficiency. To mitigate these risks, maintaining safety stock can act as a buffer against fluctuations in demand or supply, helping you fight back uncertainties. When surplus stock accumulates, liquidating it via discounted sales, donations, recycling, or disposal can minimize inventory costs, free up space, and alleviate cash flow.
- Step Up Your Forecasting and Planning: By putting into action demand-sensing techniques that leverage real-time data and advanced analytics, you can maximize your ability to adjust forecasts. Forecasting mistakes are a major contributor to stockouts, making it pertinent to smoothen your approach. You must conduct regular demand validation reviews to incorporate market trends, seasonality, and promotional activities into your forecasting models. As a result, you will be able to generate more accurate forecasts.
- Scale Up with Inventory Management Software: Automation is around the corner, and every business is utilizing it to the core. Do not lag behind! An inventory management software can substantially save your time and reduce errors that cause stockouts. For instance, you can opt for MapMyChannel which can automatically update stock counts in real time whenever a sale is made. This makes sure that your inventory levels reflect the current stock levels. Moreover, you can set up auto-triggering reorder points, which gives an alert regarding restocking based on predefined thresholds. This proactive approach helps maintain optimal inventory levels and prevents stockouts.
- Wrongful Reporting: Not to miss accurate reporting. You need to make sure your inventory data accurately reflects your actual physical stock. This requires a dependable and consistent approach to recording, updating, and reporting your inventory information. This can be achieved via engaging in thorough discussions about the optimal allocation of supply chain capacity and the best assortment strategies to balance margins and inventory levels.
- Positive Relations With Your Suppliers: Your relationships with suppliers affect your relationships with customers. This is not immediately apparent. A good, dependable supplier can help you keep your stock at the ideal levels throughout the process, deliver your items on schedule, shorten the lead time, and offer you credit when an unforeseen spike occurs. An unhappy supplier may threaten your business by promising delivery of goods but failing to provide them, delay your shipment, be unresponsive, and withhold supplies until you pay the bills.
To Conclude
Navigating the challenges of stockouts is essential for maintaining a seamless customer experience. We all know the frustration of encountering “product not available” during a shopping journey. This can drive your customers away and damage brand loyalty. As you’ve seen, stockouts are not just about empty shelves; they represent missed opportunities and potential reputational harm.
By implementing the above-mentioned strategies—like refining demand forecasting, enhancing internal processes, and nurturing strong supplier relationships—you can shift the narrative. Not to forget automation via modern inventory management application like MapMyChannel will help streamline operations and keep a close eye on customer trends, ensuring you remain proactive and responsive to market needs. Every step that you take to redefine your inventory management not only promotes operational efficiency but also ensures that your customers get the products when they want them. So, let us collaborate to keep your shelves stocked and your customers delighted!
Take the first step toward smarter multichannel management – Register for a free trial now and discover how MapMyChannel can help you save money, boost efficiency
