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The Inventory Mentor

Apr 19, 2018


Minimizing the fall out from stock-outs

If you need to provide high availability to keep your customers satisfied, stock-outs are quite simply a nightmare. Dealing with angry customers can send stress levels of your employees soaring. Your order and sales staff will do whatever they can to placate the customer while your purchasing and planning colleagues run in circles, begging and pleading with suppliers or manufacturing. Whichever way you look at it, it’s not a pretty picture.

Even if you think you have covered all the bases to prevent stock-outs, they are unfortunately,  an ugly reality. Predictions for supply and demand will never be completely perfect; the greater the inaccuracy, the greater the risk of stocking out.

Once your customer has requested stock that you don’t have, it immediately puts you in a compromised position. You certainly don’t want to lose the sale, and worse still, there may be the risk that your customer will source from your competitor, and you may end up losing the customer altogether!

A proactive approach could save the day

Some creative thinking may mean that the stock-out doesn’t have to cause too much damage to your sales figures and customer relations. And you might manage to turn the situation around by building better communication strategies with your customers.

Perhaps the approach to dealing with stock-outs should be shifted to focus on items that are stocked out prior to the request for the item. What if, on a daily basis, you could be alerted to items that are stocked out, regardless of whether there has been a request for the item. And better still rank these items based on the potential lost sales value. That way you could choose to only action items that could cause the most damage to your business.

Consider formulating a stock-out procedure

First, check that the stock-out is legitimate – data gremlins can distort the picture and you wouldn’t want to put a plan of action in place based on inaccurate data. Check the current stock level, and factor in existing purchase orders.

Before making plans to find stock, ascertain whether your customer will wait for the stock and for how long. Good communication could avoid all kinds of effort to get stock that might not be necessary.

And if remedying the stock-out immediately is the only option, determine what can be done. Can you transfer stock from another of your branches? Is there an opportunity to expedite an existing order? Even consider air-freighting a portion of an order — can you source from an alternate supplier, or even a competitor? This might seem extreme, but may be worth the effort and expense if you can prevent the loss of a sale, or worse still, a customer.

Most importantly, resolve why the stock-out occurred and avoid repeating the same set of circumstances. Constantly working to identify the root causes of why a stock-outs occur has proven to reduce the incidence over time.

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