A stockout is a worst-case scenario when managing your inventory. Either the customer has to wait for a product or they leave and never come back again. There are also significant delivery and rush charges associated with backorders and canceled orders, as well as a negative customer experience. Overall, the effects of a stockout create a major cost to your company and reputation.
Fortunately, stockouts are not an everyday occurrence. Typically, when they do arise, the stock is refilled, and the problem is solved. This makes them seem more like a nuisance or mistake and rarely seen as a symptom of something deeper that needs to be addressed.
Effective Stockout Reduction Strategies
An effective inventory management system involves creating a balance between stock levels and demand. Your automated point of sale helps strike this balance, but more attention is needed to control internal processes and external vendor relationships to know how to prevent stockouts.
Building a plan to prevent or minimalize your stockouts will have a positive effect on other areas of your operations. To avoid a stockout, you need to be more strategic, so it’s time to look at the big picture and review the processes and policies that affect your inventory.
Periodic Review Policy
You have a business to run, and managing inventory is only one part of it. If you devoted all of your time to inventory, then you may be neglecting all of the other aspects of your business. The best way to stay on top of your inventory is to implement a periodic review policy. This enables you to track vendor shipments and product sales on a regular basis.
- Are my vendor shipments arriving on time?
- How many ordering mistakes were made, and why?
- Which product categories are the biggest sellers?
- Which individual products need the most attention?
It also allows you to make adjustments in a timely manner. For high demand items, you can set up a process to track them in real-time and encourage employees to be more proactive when physical inventories are low.
Vendor Managed Inventory
Data has changed the landscape for vendors and distributors, growing their services by leaps and bounds. You may be on a first-name basis with these strategic partners, yet don’t know all of the services that they provide. Did you know that your vendors hold the key to more sales? Many of them will have important data that will improve your forecasting, plus inform your marketing activities to capture more attention.
You have an opportunity to take advantage of vendor managed inventory to reduce your carrying costs and improve your replenishment times. Combining your point of sale data with their knowledge of the marketplace allows you to understand the true demand for products and how much on-hand inventory you need.
Customer Relationship Management
Often excluded from the inventory management equation, managing your customer relationships has a direct impact on cost-effective inventory control strategies. Satisfaction and loyalty are the primary motivations for repeat customers, and repeat customers spend more than new ones. To ensure customer loyalty, you need to invest in the following:
- People – Your employees are the foundation for great customer service.
- Technology – A better customer experience begins with an automated point of sale and marketing.
- Process – Continuous review of operations will boost productivity and profitability.
Improving engagement with your customers ensures sustainable demand for the products and services that you provide. When you have the right people, technology, and operational processes in place, you guarantee that each customer will find the products they need at the prices they expect.
Your Opportunity to Grow
Your goal as a business is to establish personal, long-term relationships with each customer, making certain that their expectations are met. Stockouts prevent you from achieving this goal, which is why implementing each of these strategies will help you retain more customers and grow your business.