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The 2 Major Causes Of Out-Of-Stock Situations & How To Prevent Them

"Cold room in the warehouse with cardboard boxes on racks. realistic interior of industrial storage with shelves, tiled walls, and floor. refrigerator chamber in factory, store or restaurant
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Stocks or goods are what make an inventory management system an industry that helps every small and big business to run efficiently and smoothly. A properly functioning inventory management software reflects how consistent an organization is with its stock updates and quickly it can deliver the goods to its customers and clients.

One of the dreads for retailers is when the inventory management system is running out of stocks. Stock Outs lead to lost sales, and increase operations and costs, and results in reduced customer satisfaction and loyalty, This makes them feel annoyed as well as disappointed when they can’t find the items they are looking for. Every retailer can connect with this emotion as they try with all their effort to avoid facing this emotion from the customer

At a point when the company is going through a severe situation of stock outs, every business starts thinking about how to fix it. They try looking for answers to questions like, `How can they ensure that they are able to drive out out-of-stock nightmares and ensure that their customers are delighted with their adventures?.’

And luckily for retailers and customers, there are quite a few solutions available to help avoid the dreaded stock-out scenario. And quite a few causes of stock out can be avoided simply by taking small steps to get a better understanding of the business and products. 

While there are plenty of causes of stock-outs to happen in general, let’s take into consideration two important reasons for stock outs and address the problems with solutions in this blog. 

Two Common Reasons For Out-Of-Stock Situations:

1.Inappropriate demand forecasting: Decision-makers make inaccurate demand forecasting because of their inability to analyze data from various external data sources, all of which impact a product’s demands and buyers and behaviors.

Some of the data sources can include:

1.POS DATA: According to the reports from the point of sales view, demand emphasis sales combined with lost sales. A lot of times, shoppers do inform the store about the products they didn’t find so they can be informed when it comes.  But most often as the stores would like, it becomes practically impossible to measure demand accurately. 

However, if stores can manage thot point of sale, it becomes better for them to gauge quickly certain items that are moving.

2. Weather: The weather has an immense influence on the consumer’s Psychology, habits preference for products, and overall behavior. The availability of the products depends upon specific weather changes throughout the year. But if there’s a sudden outbreak of diseases, the demand for certain health-related products such as face masks and sanitization products would go up drastically.  

These are the situations that companies require extra data for, in order to make sure that they have enough stock to meet the consumer’s demands. One way to have proper stocks of the products in the warehouse is through assessing historical data in combination with future weather predictions, as well as the past weather patterns, stores will be better to forecast the levels of demand and supply. 

3.Events: When big events are organized, for example like music concerts or sports tournaments, there’s a sudden inundation of consumers and subsequent increase in the demand for certain types of products- for example, beverages, novelty items, etc.

4.Past Sales: Data that is collected through past sales provides invaluable inputs on demand and sales for different products at different times and locations throughout the year. 

For those who do the field sales job, they track certain key metrics and KPIs around primary and secondary sales. These metrics enable them to filter if there are sufficient products available across different outlets. 

These metrics include MSL and OTIF losses.

The MSL Compliance emphasis on the Must Stock List, which represents the number of SKU that must be present in a particular class/category of an outlet, and in the case of OTIF losses, CPG companies and distributors are aware that all orders have to be received on time and in full. 

Companies try their level best to achieve this ideal, but they usually tend to face a lot of challenges in doing so. Required stock being unavailable at the warehouse, trucks not being available, insufficient truck loading, etc, all of these cause orders to not be filled and in the required quantity. 

The field sales personnel uses Excel Sheets to track the KPIs and generates reports. It a consolidated data, that makes the entire process inefficient, unnecessarily time-consuming, and prone to error.

The perks of this inefficient process are diminished accuracy and slow decision-making, which impacts the overall sales and the revenue. The sales teams are essentially rendered incapable of properly analyzing store performance and identifying products that require restocking.

The three primary ways to prevent any hindrances that could come by due to any out-of-stock situations:

1) Using a better inventory management system: The first step is to switch to a good inventory management system like ZapERP Software, which automatically modifies inventory management levels that help to rise up your sales. It helps in automatically updating your database also. 

Such solutions are also beneficial if you have several locations because they allow you to manage stores from one palace. And if at all you are not ready for a full-time retail management solution, consider an inventory management system in Excel. It is basic, simple, and can give your data that you require to spot the inventory inaccuracies. 

2) Integrate your platforms: While selling through multiple channels be sure to connect all your retail platforms. This typically means integrating your POS system with your eCommerce site. This helps in ensuring all your catalogs are in sync and the stock levels are updated every time you make a sale. 

3) Conduct regular stock counts: There can never be accurate numbers if there’s no proper system that is tracking and updating them.

While modern inventory systems can do a great job at keeping your stock levels in check, you still need a handle on the amount of physical inventory that you have.

With full inventory counts, you’ll need to set aside several hours to count every item that’s in your store. You can choose to do it after you close for the day, but if that’s not enough, you may have to halt operations for about half a day or so. But its important to never forget that the right method differs from one business to another.

Conclusion: At some point in time, every business does go through a time when they run out of stocks. But, by upgrading your warehouse systems with the implementation of the correct inventory management system, this problem can be reduced to a certain level.!

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