What is stockout and how to avoid it?

Ash Baggott

Being out of stock, or stockout, is something a retailer dreads to say to a customer. It means that the inventory for a product is completely depleted and generally occur when a business owner hasn’t ordered enough inventory to meet customer demands. Losing a sale is only one of many problems surrounding stockouts.

The effects are felt the most around the customer experience. In today’s fast-paced retail environment, customers are constantly searching for the best deals, and they will quickly look for alternatives when they feel inconvenienced. This is damaging because if the customer had a negative experience, they will most likely spread the negative review through word-of-mouth or on social media, which is damaging to your brand. You’ll have to recover that customer quickly by giving them a good reason to come back, otherwise they’ll happily make their way to your competition.

How can you avoid stockout?

Inventory management systems can easily be rectified our updated if any problems are occurring. However, as with every form of process, it requires an investment in time and resources. You can choose an easy to use ERP cloud system to manage this for you, saving you implementation costs.

What causes stockout and how to prevent it?

  • Data issues

Inaccurate data is the number one problem why stockout’s happen. Types of data that can be incorrect are; goods received from suppliers, data entry, physical counts, and theft. 

This can be avoided through automation and better organisation. Ways to become a better organised and proactive business is by implementing cycle counts, which alert management to problems that occur when there are inaccurate numbers due to shrinkage and theft.

By installing a cloud-based inventory management software, you can save time and reduce errors while entering stock into the system. It can also be tied in with the point of sale for accurate, real-time data.

  • Timing is everything

Knowing when to reorder is crucial and needs to be data driven. Take the time to examine your historical sales reports to highlight trends, spikes in demand, and find seasonal fluctuations.

If you focus on single products and transactions, and base orders on those you’ll miss other opportunities due to its’ time intensity.

  • Suppliers are your best friends

Your suppliers will hold the key to increasing your company’s margins and order fulfillment. Start exploring your relationship with your suppliers more in the way of a partnership and you will see much better outcomes.

If your supplier feels more like a partner, then you’ll be able to negotiate shipping costs and product availability. You can also reduce waste and costs by consolidating the number of vendors, think ‘quality over quantity’, the better relationships you build, the lower the costs will be.

  • Training is key

Errors are most likely to occur from human error during the inventory management process, regardless of how advanced your system may be, you need to train your staff and management in the best way possible. Often, little mistakes are covered up by quick thinking employees, which leads to bigger problems.

Your employees keep your business turning, so invest in them! They need to know exactly how the system works – like the back of their hand – and all the procedures that are involved. A proactive and well-trained employee will prevent errors and contribute to process improvements.

Being out of stock may seem like a positive sign that your product is doing well in the market, however, you’ll find that if you cannot meet your clients demands you’ll be making a loss eventually. Using Holded’s Cloud ERP software #1, you can easily manage your stock levels, inventory, sales, finance, operations, and human resources in one beautiful platform.

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