{"id":7808,"date":"2022-11-13T16:16:37","date_gmt":"2022-11-13T16:16:37","guid":{"rendered":"https:\/\/dmsretail.com\/RetailNews\/avoiding-stockouts-6-preventable-causes-of-out-of-stocks-and-what-to-do-about-them\/"},"modified":"2022-11-13T16:16:37","modified_gmt":"2022-11-13T16:16:37","slug":"avoiding-stockouts-6-preventable-causes-of-out-of-stocks-and-what-to-do-about-them","status":"publish","type":"post","link":"https:\/\/dmsretail.com\/RetailNews\/avoiding-stockouts-6-preventable-causes-of-out-of-stocks-and-what-to-do-about-them\/","title":{"rendered":"Avoiding Stockouts: 6 Preventable Causes of Out-of-Stocks and What to Do About Them"},"content":{"rendered":"

\"Retail<\/a><\/p>
\n<\/p>\n

\n
\n
\"\"<\/figure>\n<\/div>\n

Stockouts almost always make it to the \u201cworst nightmare\u201d lists of retailers, and for good reason. Not only do they lead to lost sales, but out-of-stocks also result in reduced customer satisfaction and lower loyalty levels. Shoppers often feel let down when you don\u2019t have what they\u2019re looking for, and the last thing you want is to disappoint customers.<\/span><\/p>\n

Fortunately, though, there are a number of solutions to your out-of-stock woes. Many causes of stockouts can be prevented by taking steps to better understand your business and products, and by refining your store\u2019s processes.<\/span><\/p>\n

To give you a better idea of how you can accomplish this, below are 5 common causes of stockouts and pointers on how you can sidestep them:<\/span><\/p>\n

1. Inaccurate data<\/b><\/h2>\n

It\u2019s <\/span>very<\/span><\/i> easy to run into inaccuracies when dealing with inventory. Between shipment variances, misplaced products, returns, and stolen goods, retailers find that the inventory numbers they have on paper (or on screen) often don\u2019t match what they have in their stores.<\/span><\/p>\n

Such discrepancies can lead to merchants mistakenly thinking that they have an item in stock when they don\u2019t, so they end up re-ordering the wrong products or quantities.<\/span><\/p>\n

How can you address this? Consider the following:<\/span><\/p>\n

a. Use a modern inventory system <\/b><\/h3>\n

The first step to avoiding discrepancies is to implement an electronic (ideally cloud-based) inventory system. \u00a0Keeping track of products using a pen and paper isn\u2019t just time-consuming, it can also lead to mistakes.<\/span><\/p>\n

It\u2019s best to use a point-of-sale or inventory system that automatically modifies inventory levels as you ring up sales, so you won\u2019t have to worry about manually updating your database. Such solutions are also beneficial if you have several locations because they allow you to manage multiple stores from one place.<\/b><\/span><\/p>\n

Not ready for a full retail management solution? Consider <\/span>creating an inventory management system in Excel<\/span>. It\u2019s easy, basic, and it can give you the data you need to spot inventory inaccuracies.<\/span><\/p>\n

b. Integrate your platforms<\/strong><\/h3>\n

If you\u2019re selling through multiple channels, be sure to connect all your retail platforms. This typically means integrating your POS system with your ecommerce site.<\/p>\n

Doing so helps ensure that all your catalogs are in sync and that stock levels are updated every time you make a sale. After all, the last thing you want is to sell something online that isn\u2019t physically available in your stores or warehouse. <\/p>\n

\n
\n

Vend Tip<\/strong><\/h4>\n

Connect Vend to powerful ecommerce platforms like BigCommerce, Shopify or WooCommerce and list your products online in minutes. Explore new markets and discover new customers while Vend takes care of your products, inventory and orders as you take off.<\/p>\n

Learn More\n <\/p><\/div>\n<\/div>\n

c. Stay organized and vigilant <\/b><\/h3>\n

Modern inventory systems can only go so far. While a nifty solution can keep your databases synced, it can\u2019t deter shoplifters nor can it stop suppliers from delivering the wrong quantities.<\/span><\/p>\n

This is where your diligence and organizational skills will come in. Get to the root of your inventory discrepancies. Is it an issue with your vendors? Are you dealing with theft? Whatever the case, find the reasons why the numbers aren\u2019t adding up and take the necessary steps to stop them.<\/b><\/span><\/p>\n

If it\u2019s a matter of vendor discrepancies, for example, you may want to make changes with how deliveries are handled in your store. Perhaps you need to reschedule shipments to make sure that deliveries don\u2019t happen all at once, or maybe you need to assign someone to double check the packing slips.<\/span><\/p>\n

Dealing with theft? It could be time to upgrade your security system or re-arrange your store to make it easier for associates to keep an eye on shoppers.<\/span><\/p>\n

d. Consider RFID (Radio Frequency Identification)<\/strong><\/h3>\n

Other retailers are taking on a more hi-tech approach when it comes to maintaining inventory accuracy. Many are now using RFID\u2013a technology that can store and track product information using a chip embedded in an item\u2019s tag or packaging.<\/p>\n

\"rfid\"<\/figure>\n

(Image credit: NXP)<\/em><\/p>\n

RFID enables merchants to monitor and search for merchandise using a handheld scanner (see image above), making it faster and easier for them to track down where each item is.<\/p>\n

\u201cPeople manually counting items in the supply chain take too much time; it is too expensive and is also fraught with error,\u201d writes Will Roche of Xterprise on RetailSoulutionsOnline.com. According to him, RFID technology is the top solution for inventory data inaccuracies, especially for apparel and footwear retailers.<\/p>\n

e. Conduct regular stock counts<\/b><\/h3>\n

You can\u2019t have accurate numbers if you\u2019re not 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.<\/span><\/p>\n

That\u2019s where physical inventory counts come in. Set aside time to count your products and ensure that what you have on paper matches up with what\u2019s actually in-store or in your backroom.<\/span><\/p>\n

Retailers typically have two options when it comes to stock counts: full inventory counts or cycle counting.<\/i><\/span><\/p>\n

With full inventory counts, you\u2019ll need to set aside several hours to count every item that\u2019s in your store. You can choose to do it after you close for the day, but if that\u2019s not enough, you may have to halt operations for about half a day or so. (Be sure to notify your customers beforehand!)<\/span><\/p>\n

If you\u2019re not keen on closing your store, then cycle counting might be a better option. This method entails counting and checking just a small selection of SKUs daily until you\u2019re able to \u201ccycle count\u201d through your entire catalog. It allows you to stay on top of stock counts without having to close your store.<\/span><\/p>\n

The \u201cright\u201d method depends on each store, so see which practice works best for you.<\/span> But whether you decide to conduct full inventory counts or you\u2019d rather stick to cycle counting, aim to count all of your merchandise once a month, or at the very least, once every quarter. <\/b><\/span><\/p>\n

Avoiding stockouts requires you to have near real-time information on what you have (or don\u2019t have) on hand. You won\u2019t be able to do that if you\u2019re only counting your merchandise once or twice a year.<\/b><\/span><\/p>\n

2. Failure to re-order in a timely manner<\/strong><\/h2>\n

This issue is pretty straightforward: products are flying off the shelves faster than you can re-stock, and this results in you selling out of in-demand items. How can you prevent it? Here are a couple of ways:<\/p>\n

a. Find OOS (out of stock) patterns <\/strong><\/h3>\n

Try to identify OOS trends in your store. A study by P&G found that OOS \u201ctend to form patterns such as day of week,\u201d and retailers can find them by regularly auditing their inventory and taking note of the days and times of the week when they usually experience stockouts.<\/p>\n

Consider the chart below:<\/p>\n

\n
\"oos<\/figure>\n<\/div>\n

(Image credit:\u00a0A Comprehensive Guide To Retail Out-of-Stock Reduction In the Fast-Moving Consumer Goods Industry)<\/em><\/p>\n

By looking at the data, it appears that OOS for this particular store peaks during Friday afternoon, Saturday at noon, and Sunday late afternoon. With this data in mind, the retailer can then schedule to have products delivered and replenished at just the right times to ensure that they don\u2019t run into out-of-stocks.<\/p>\n

b. Implement demand forecasting <\/b><\/h3>\n

As the term indicates, this process is all about anticipating demand so you can determine what products to order and when.<\/span><\/p>\n

You can try to forecast demand on your own by using your judgment and factoring in stock turn, sell through, historical sales data, and other components such as promotions, seasonality, economic state, etc. Crunching these numbers should give you some insights into how products are going to perform.<\/span><\/p>\n

One example of a retailer that forecasts demand efficiently is Christmas Elves, a holiday store in Australia. <\/span><\/p>\n

\u201cI have to place my Christmas orders in January or February each year, so we pretty much get one shot at purchasing. If I under-purchase and sell out then I lose sales opportunities,\u201d he said. <\/span><\/p>\n

According to Jason, he pays close attention to the speed at which products are selling. \u201cI call it velocity reports. I look at how many trees are selling per week and track the sales progression over time.<\/b><\/span><\/p>\n

\u201dBy looking at when sales spike and which products are selling the most, Jason and his team can get a clearer idea of how many units to order. Jason says he looks at sales velocity reports for specific products and their overall categories, and this allows him to figure out what items to order and if there are any related products that he could purchase.<\/b><\/span><\/p>\n

c. Pay attention to consumer trends <\/b><\/h3>\n

Historical data is great, but you also need to pay attention to consumer trends in your market. Are there any new products that people are gravitating towards? Are there any styles that are making a comeback? Take note, then stock up accordingly.<\/span><\/p>\n

Jason over at Christmas Elves does a great job at using trends to predict demand. According to him:<\/span><\/p>\n

\u201cFor example, there\u2019s this trend at the moment where customers have moved away from buying white Christmas trees, and instead are purchasing snow covered or flocked Christmas trees. In other words, fewer people are buying white and more people are buying green trees with snow on them, so it looks like a true winter wonderland.\u201d<\/p>\n

\u201cLooking at sales reports allowed us to identify that trend, so we haven\u2019t bought many white trees, and the ones we have are on sale.\u201d<\/p>\n

d. Set re-order points<\/b><\/h3>\n

Once you have an idea of your out-of-stock patterns and the amount of product you should have at any given time, create re-order points to ensure that you can order the right merchandise when necessary.\u00a0<\/span><\/p>\n

For best results, use a POS or inventory management solution that lets you set re-order points, so you can get notified whenever stock is running low.<\/span><\/p>\n

\n
\n

Vend Tip<\/strong><\/h4>\n

Did you know that Vend lets you set re-order points and re-order amounts? Doing so will allow stock orders to automatically populate once the inventory level of a product gets low, helping you save time later.<\/p>\n