To comprehend inventory stockouts and how to traverse inventory levels, we must first define stockout. When inventory runs out, it prevents the purchase or shipment of an item, lowering sales and decreasing income. Clients' final farewells may also be related with stockouts, since over 90% of the time, he will not return to you for another shopping catastrophe. A lack of inventory can be likened to King Tut's curse, which destroys everything. You will not be able to refill supplies with an acceptable number of units if there is no proper signal, exact projection, and final planning. And the product stockouts will stay the same. Inventory stockouts and stockouts are now synonymous. When your inventory runs out, it indicates your items are stockouts or inventory stockouts and are no longer available to your clients.
DO YOU KNOW?
- 66% of buyers feel that supply chain problems won't ever be resolved.
- In 2021, the supply chain hurt 87% of Americans.
- Because of inventory stockouts, 60% of purchasers are unable to buy a product.
- 82% of them worry that the supply chain may interfere with their plans for important events.
- 61% of them feel annoyed, 46% impatient, 45% nervous, and 34% furious about inventory stockouts.
- After COVID-19 broke out, 75% of businesses experienced poor operations during inventory stockouts.
KEY TAKEAWAYS
- Latest statistics on inventory stockouts
- What are inventory stockouts and stockouts?
- Why does inventory stockouts known as poor performance in the finals?
- What are the measures to avoid stockouts?
- What are Reorder Point and Safety Stock? How to calculate Safety Stock?
- Why inventory management in warehousing is important? How to do it?
- The conclusion
Why Inventory Stockouts is a Great Distress?
Inventory stock outs surely have a bad impact on customers' purchasing experiences, therefore you should make every effort to avoid them. Stockouts irritate and frustrate both companies and buyers who are ready to buy and may want your items right now but are unable to do so because they are out of stock. It eventually results in a loss of money and a ruined reputation for your company, and the customer is less likely to return. Customer dissatisfaction and negative feedback may make or ruin your business. Customers who regularly observe that your product is sold out may leave negative feedback on your website or on independent review websites. These evaluations are available to prospective clients, who may see your organisation as untrustworthy. Your negative reviews provide your competitors an edge, which sells the alternative to your goods.
Because they know where you're coming short, they may start pushing the alternative product that's running low at your end. The bad news is that stockout solutions are not straightforward since there is no universal inventory management system that works effectively with all types of businesses and inventory navigation in stockouts. Every firm has a unique set of risks and opportunities, depending on the sector and present supply chain warehousing infrastructure. However, one way ahead is to automate their inventory management system at the warehouses where their units are held, as AWL has done with all of its facilities, which are all automated with the newest warehousing solutions and supply chain technologies. Establish replenishment plans to guarantee that merchandise gets on shelves at the appropriate time and location to avoid stockouts with the help of efficient distribution and logistics management.
So, what to do?
Before you jump onto stockout solutions, let's understand first, why does inventory stockout happen? What is the cause of stockouts in inventory? Honestly, there are numerous causes of stockouts. Products going out of stock can be caused by a variety of factors, including underestimating client demand, significant supplier delays, not having enough money to buy additional inventory, etc. Stockouts are frequently unavoidable and many times beyond the control of businesses disrupting the inventory levels impacted by delivery problems, production delays, human mistakes, or unpaid invoices. If these kinds of delays occur frequently, you should think about changing suppliers or looking for other ways to improve supply chain management, such as partnering with 3pl distribution companies like AWL India. AWL being the leading warehouse provider and logistics management company across the nation that uses technologically advanced tools to assist with inventory forecasting.
Now, let's fix it!
A situation where merchandise is out of supply must be avoided for direct-to-consumer brands. Customers can rapidly find alternatives if your items are not readily available. You may permanently lose potential and returning customers, affecting your customer lifetime value in addition to lowering sales and average order value. What can you do to keep stockouts from affecting your company's performance apart from selecting the best fulfillment center in India? Let’s Find Out!
Improve Your Turn-around Time
Turn-around time (TAT) can be defined as the time between making a booking and getting the order by your client. However, the turn-around time for you is the period between your purchase order and the supplier's actual delivery date. This needs to be really important. Your inventory is just maintained on hand to cover the supplier's turnaround time. After all, if they could transfer products into your warehouse in zero days, your company wouldn't even need inventory storage. But, if you're the seller, managing your warehouse's inventory will be difficult, if not impossible in most circumstances.
Your aim is to cut TAT as much as possible in order to meet client demand and shorten the period between ordering stock and receiving payment. This allows you to maintain your inventory's stock levels exactly and avoid stockouts. Leading warehouse service providers and warehousing companies in India, such as AWL India, enter the scene here. These warehouse management businesses have integrated cloud computing and automation into their storage facilities, which are fully automated and operate on artificial intelligence and robots.
Predict Reorder Point
To accurately predict the reorder point, these warehouses and inventory management companies evaluate stock reorder points in advance. A reorder point is the stock level below which you do not want to go. When finding an optimal inventory reorder point, the length of time it takes to place a new order before your stock falls below the cutoff point is also taken into account. In other words, a replenishment order should be placed as soon as one of your commodities' stock levels approaches the reorder mark. Calculating reorder points in the inventory management system ensures that there is never a supply deficit. It also aids in overstocking, which results in less places for essential products.
Reorder points are calculated by automated warehousing businesses such as AWL by summing TAT required and safety stock. In the event of an unexpected increase in demand for a certain product, safety stock is deployed. If your experts make incorrect market demand estimates, safety stocks may turn out to be bad.
Calculating Safety Lock
Let's practise this in a real-world business scenario. Suppose Pepsi has sold a maximum of 100 cans of cola in a store in one fine day. This is the Maximum Daily Usage (MDU) of Pepsi in a store. These 100 cans have taken a maximum of 20 days to travel from the manufacturing plant to fulfillment services facilities. This is their Maximum TAT in days. But not every day any store can sell 100 cans, on an Average the daily usage in all the stores is 50 cans. This became Pepsi’s Average Daily Usage (ADU). Also, not all the time 100 cans reach fulfilment centres in 20 days. Sometimes they get delivered in 10 days, sometimes in 25 and may be different the next time. But the Average TAT is calculated typically as 15 days.
Now the formula is simple:
(MDU x Maximum TAT ) – (ADU x Average TAT) = Safety Lock
So, let's do the maths,
(100 × 20) - (50 x 15) = 1250
This suggests that Pepsi should have 1250 cans of cola as a safety stock at any time.
Inventory Management is the Solution
The first stage in inventory management in any B2B logistics firm or B2B warehouse management company is forecasting future demand. Inventory management businesses, such as AWL India, must ensure that enough inventory levels are available to meet customer requests while without raising storage and delivery costs. It's one thing to not have enough inventory to fill orders and satisfy customer demand, but it's also critical to avoid having too much unnecessary inventory, which can result in higher inventory carrying costs and Dead Stock. Dead stocks are referred to as the stocks that are no longer required in the warehouse because they are either out-of-date or their trend or season has passed. Therefore, these dead stock cannot be used for fulfillment and logistics services and cannot be used in the future.
Your bottom line will undoubtedly suffer if you do not have proper inventory management. Fortunately, warehouse businesses and storage facilities such as AWL make it simple to keep track of your inventory. These warehousing management companies use adequate automation in their inventory management systems and invest heavily in highly advanced inventory management software and other digitization processes in logistics and supply chains, which are required in inventory management and avoiding inventory stockouts. They can keep your inventory in order by providing tech-savvy and integrated inventory management skills, as well as strong order fulfilment services.
Conclusion
Empty shelves and inventory stockouts suggest danger for firms dealing with uncertainty and increased client demands. Businesses continue to utilise the same warehouse management methods and encounter issues as a result of inconsistent inventory delivery. The solutions to all of these issues are the above-mentioned quick replenishment techniques, inventory management, and calculation and reorder points, which ensure that enterprises are protected in the approaching, unexpected years. Your company should prioritise preventing stockouts and enlisting the assistance of major logistics and warehousing businesses to manage your inventory with their skilled staff and cutting-edge inventory management technologies.
Also, focus on supply chain efficiency by utilising these B2B logistics providers as reliable transportation partners for your goods. This allows you to manage stocks more effectively and prepare for future demand. Another advantage of hiring a supply chain company is that your company will receive retail fulfilment know-how, cutting-edge technology, round-the-clock inbound and outbound logistics support, and on-time delivery of your goods to your customers' doors. Many well-known supply chain management firms use tech-enabled logistics and warehousing services.
Rituraj Pankaj
Tech Leader in Supply Chain Management